Young people are foolish for leading cars?

[Kitchendrama1]

£2k to get the car and 36 payments of £350 of which you get nothing at the end of 3 years. £14,600 with insurance included, for a car you won’t own for 3 years.

I can understand insurance is high for a young person, but it’s dumb?

I lease. It's a set monthly payment (under £300 per month) with servicing and maintenance included (so tyres/ brakes etc)
for a brand new car which I swap in 3 years time for another brand new car.

Works for me.

I understand wanting to own something at the end of it in theory, but chances are it wouldn't be worth anything near what you paid for it and with all the servicing and maintenance costs of an older car I'd rather just have the peace of mind.

I don't want to own a car that might cost me 1000s in unexpected repairs, I like having a fixed monthly amount with no extra to pay. I also like changing my car regularly. Some people spend on holidays, or beauty treatments, I like to spend on nice cars!

We have looked at doing this for DD when she passes her test, especially if we can get one that includes insurance (saw this advertised a while ago but it might not exist now)
If we can pay one amount per month for everything then why not? She would get a brand new car to drive so no concerns about reliability or repair bills

I used to be a snob about this kind of thing but when my old car died a death several hundred miles from home after I’d just paid a grand to get it through the MOT the smile was wiped off my face.

Over 3 years it has been way more efficient to have a car on PCP than to have a second hand car costing the same amount. I only pay £100 a month though as I’m not too concerned about having a desirable car, just a reliable one!

We get our cars from Volkswagen and every 3 years get brand new cars. I always negotiate hard so we get lots thrown in for free. In all the years we’ve been doing it, we’ve never had a car break down. Personally it’s worth it for a peace of mind.

For all those with good deals on leasing and PCP, what type of cars have you got and companies do you use?

I'm interested for my next car purchase.

Not everything we do always makes sound financial sense. Sometimes people just want a nice car to drive (especially if they spend a lot of time in it) and can't afford 10s of 1000s of pounds outright. Not that I think leasing never makes sound financial sense.

Honestly for a young driver it might still make better financial sense.

For the first 3 years of driving they have a reliable car with insurance fully covered. Given that insurance alone can be in the thousands for new drivers even in old bangers the outlay is probably comparable. Factor in MOTs and unexpected costs associated with older cars and it's bloody expensive.

At the end of the 3 years, they have the option to buy the car and more importantly they'll have 3 years of hopefully accident free driving experience which will massively reduce their premiums thereby opening up their driving options much better.

No doubt some people make bad leasing choices, but it's a sensible option for many.

If it includes ‘free’ insurance for an 18 year then that could be £150/200 a month. If they are earning a wage and need a reliable car it’s a sensible outgoing. Most won’t have several thousand to buy a car and pay insurance up front. I personally have had pcp and liked it but payment £140 a month - reliable car, no maintenance costs I even included servicing. I bought car at end of plan and it was much cheaper than if I’d bought it as a second hand car.

I like the think of myself as financially savvy.
I used to have the same opinion as the OP about leasing and rolled my eyes at my DH year after year for suggesting it.

Then - we bought him an approx 5/6 year old car for £12k. 3 years later something went which would be £2k to fix.
The garage bodged it so it worked & we traded it in. We got £3k trade in.

In 3 years we lost £9k in value (he also did a lot of miles & got a car allowance)
We now lease a brand new Audi for £3.5k a year.
No repair bills and are spending around the same as we lost in depreciation on a much older car

On the surface it seems like a waste of money but depreciation needs to be taken into account

I do pcp but i didn't pay much up front, a lot less than 2k. Yes more expensive than buying a car but I dont have thousands of pounds saved up so a monthly cost is more manageable. I need a reliable car - I know nothing about repairs and do a lot of motorway driving (nearly 40 miles a day...). Buying new means it's in warranty so no unexpected repair costs. Our monthly payments are a lot less than you say but then we don't have a fancy car as we don't need one. If we don't have the savings I dont see what else we could do really! (No I can't do my 40 miles on public transport things dont connect well so it would take ages)

If you’ve got 18 year old needing to travel to work at 5am 30 miles away with no public transport then they need a reliable car. If they’ve not got money to buy a new car/pay for expensive repairs as soon as theirs breaks they are in a mess. In a new job or apprenticeship not turning up due to car trouble could cost them the job. Plus safety worry if they are breaking down especially if working shifts - no one wants 18 year old girl stood on hard shoulder at midnight waiting for AA. Newer cars tend to have better safety features too.

My 19 year old with a job and good credit so far couldn’t get any credit for a lease or any other car so has a wee corsa he paid outright for until he can get something else. parents no doubt help by being guarantors for their ‘dumb’ offspring so they can get these cars?

At the end of the day it’s a choice isn’t it. If they want to pay that then fine if they can afford it, they are adults (despite not being able to get credit for one if need a guarantor) So they can Chuck their money where they like, plenty older people do the same.

It is odd to me as modern cars are more safe, reliable and long lasting than they have ever been, yet there seems to be a persistent worry to have a car more than three years old. I think the finance and lease companies have done a great job in creating and selling their finance packages to us all and convincing us that's what we want - shiny cars, no worry about insurance and servicing or going to the bank to get a loan.

I'm old school, and in my opinion the best financial deal is to buying a 2 year old car from one of the more reliable makes, using either cash or a personal loan and running it for at least 5 years, then trade in and get another 2 year old car. I did that with my car - its nine years old and only now getting to the point that it is needing things fixed other than standard oil, filters, tyres etc. DH managed to keep his BMW going until it was 12 years old. However, the problem with this old-school approach is you need the money up front to buy the car - either cash or a personal loan - and that's just not an option these days for so many people.

I lease mine have done for the past 5 years

I get a new one, don't have to pay any MOT costs, normally tax is thrown in for the first year and some sort of servicing deal then at the end of three years brand new car and no money to put down straight away..

It’s not dumb, it works for lots of people

It's a payment for transport. Plenty of people spend huge amounts on rail commutes without being considered foolish because they won't end up owning a train.

I'm considering an electric vehicle next and would consider leasing rather than purchase so I don't have to worry about unknowns re battery life etc.

I don’t have £300+ a month to spend on a car so mine is 16 years old and won’t be changed until it dies. Leasing a new one of the same model would actually be north of £600 a month so never going to happen.

It can cost nearly 4k a year to insure an under 21 (often on a really old car) in some areas. So it makes sense to get a hire agreement so they can get a better car.

I’ve just bought a car on pcp.

Used car prices are through the roof at the moment, to be able to get a three year old version of the car I wanted it was only 2k cheaper than buying new.
Then I’d have had to pay the whole lot in one go.

Instead I got a brand new car, paid a big deposit so my monthly payments are minuscule (but it was still less than the cost of a second hand car) and I got minor dent cover and services thrown in.
And over the cost of the policy I’m still paying less than the cost of the same car second hand would have cost.

At the end I can pay the cost and keep the car but I’ll probably trade it in to be honest.

I’ve always leased. I literally do not have thousands of pounds in savings to buy a car outright, so it’s out of necessity rather than choice. I choose cheap, ubiquitous cars (eg used Ford fiestas) which only cost me around £120-30 per month, plus insurance and MOT ect. It’s manageable for me this way even though I might be paying more in the long run.

I'm old school, and in my opinion the best financial deal is to buying a 2 year old car from one of the more reliable makes, using either cash or a personal loan and running it for at least 5 years, then trade in and get another 2 year old car. I did that with my car - its nine years old and only now getting to the point that it is needing things fixed other than standard oil, filters, tyres etc.

I thought this too!

And in a normal world I’d agree with you but second hand car prices are in a bubble at the moment. There’s hardly any good deals on reliable good quality cars to be had unless you’re in the trade.

I was shocked to do the maths and see that pcp worked out better.

At 18 my insurance was £180 a month
Plus I was paying for road tax, servicing and MOT and driving a car that was barely chugging along - so plenty of repairs
Plus I had upfront costs still

So I don’t think it’s that crazy if they can afford it.

Where do you think all the cars that Cinch and Cazoo and car supermarkets are coming from?

They're either fleet, Motobility or ex-lease.

We still buy cash but we're in a small minority.

I’ve leased for years and I wouldn’t have it any other way. I do a 4 year lease, pay a bit upfront and £300 a month for a really lovely car. It costs me next to nothing to run. The last one was 1 service (£300) , 2 tyres £150 and an MOT £45 which it passed. Makes total sense to me. I like cars, I drive a lot and simply don’t want an old banger and then I trade in for a New car, have no interest in owning a car

The last car I bought outright was 5 years old and 15k. I had it for 3 years by which time I had spent £2500 on repairs and about £1800 on servicing. I got £3500 for it. At that point I decided to never buy outright again.