Car leasing, worth it?

[TW]Fox;27477208 said:
But the depreciation is factored into the lease cost - for example in this particular case the trade value of the SLK55 AMG after 2 years is, according to industry experts Glass's, £32k. So thats a £12k loss in 2 years from the discounted cash price. WJA98 tells us his lease is costing £14820. So the cost of buying and trading in is lower than the cost of leasing (thats a very rough figure without a cost of capital included but the point remains).

If the lease was significantly less than the depreciation cost after discounts then the lease would be unprofitable.

Manufacturers sometimes allow unprofitable leases for other reasons but these deals are the exception and not the rule.
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All this assumes that you have unlimited amounts of cash flow.

If I walk into Mercedes with £45,000 and hand it over then I have an SLK55 but critically I no longer have £45,000 to spend on anything else. Assuming I had £45,000 to start with.

If I walk into Mercedes and lease the car then I only give them £1710. I still have the SLK55, and I still have the £43290 to spend on new stock, paying wages etc. or just to have a bit of cash on hand should the need arise.

I could finance the SLK on a hire purchase agreement and assuming I could borrow money at 2% (that's about the best a business will get) with a 10% deposit I would have to pay £4500 up front from my capital. And then I would have to pay £1755 per month for 2 years. At the end of the two years I would get £32000 back from the dealer, or maybe more or less, but it's a risk that I, the owner of the car take when I sell it. I could finance the car over 4 years and settle the outstanding finance when I sell the car after 2 years which would reduce my monthly payments to £911.25 and after 2 years there would be outstanding finance of £21000 to deduct from the £32000 I would receive assuming glass's have their sums right so there would be £9000 back in my pocket after 2 years.

A further finance option is to PCP the car as that does protect me against the vagaries of depreciation (SLK will become SLC soon and I suspect £32000 after 2 years will be a great price once the new model comes out) however that means a higher finance rate (I can get a business PCP rate from Black Horse of 2.78% at the moment) and I would have to accept Black Horse's residual value figure which will be less than Glass's figure because Black Horse don't want to be left with a loss when they sell it on. So let's say £28000 to give them a £4000 cushion. Still with a 10% deposit, PCPing £40500 over 4 years and terminating early would give me a monthly payment of £577.69.

So, my options are;

Cash purchase - £45000
Finance purchase - £4500 cash outlay immediately and £911.25 per month
PCP - 4500 cash outlay and £577.69 per month
Business Operating Lease - £1710 outlay and 570 per month.

And at the end of every option I have exactly the same outcome. The car is on my driveway for me to use as I see fit.

You will definitely point out that ultimately shelling out more money will ultimately save me money. But right now, I have more money in my pocket, and cash flow is where businesses live and die. For a business (and business people) operating leases really are the smartest option unless the business is incredibly cash-rich.
 
The other thing I probably ought to point out is that although my business could probably afford to buy one Mercedes outright, the other staff who all have vehicles would have to ride push bikes.

Having £50000 tied up in cars is only thing, having £750,000 tied up is quite another.

Not entirely pertinent to the OP as he only wanted one car, but if you have a small fleet of cars it soon starts to add up.
 
Life is all about choices and personal preference.

In some situations, a lease can be the better financial option - the rare cases when it is an unprofitable lease.

However, with other cars its madness - look at the BMW Mini when it first came out. The residuals were incredible, meaning those who bought outright had cars that had barely lost any cash.
 
[TW]Fox;27476268 said:
Every so often a deal makes sense and should be grabbed but as a general rule leasing and PCP's are the two most expensive ways to have a car.
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I am thinking of going PCP on a new Fiesta ST, but only because Fords interest rate is 4.3% on a 24 months pcp plan (which is roundabout where most personal loans are at) and they give you a £500 deposit contribution if you take out Ford finance. In this case, getting a bank loan would actually work out potentially more expensive (i intend to keep the car and pay the final value amount in 2 years).

i think you just have to be careful not to be blinded by monthly amounts. I am obviously going by the absolute total cost, trying to get as much discount on the car as possible, and working out which finance deal /monthly payments will work out the least expensive overall.
 
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Conanius said:
Life is all about choices and personal preference.

In some situations, a lease can be the better financial option - the rare cases when it is an unprofitable lease.

However, with other cars its madness - look at the BMW Mini when it first came out. The residuals were incredible, meaning those who bought outright had cars that had barely lost any cash.
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Pretty much this. Everyone is different at the end of the day and even if someone had £25k to spend on a brand new car it may often be preferential to lease rather than tie up all that capital in an asset.

Brand new car example:
- lease: you are losing £X per month in finance repayments
- purchase: you are losing £X per month in depreciation

Either scenario results in you are paying out one way or another.
 
I'm bringing this topic up again as I'm going through this dilemma at the moment. My Mazda 3 has just failed it's MOT with a potential £1500+ bill, the car is insured for less than £2500, so probably won't get the work done.

I only use the car off peak times and usually cover between 2000-3000 miles per year (I cycle to work). Would leasing be a more financially viable option?
 
fenderbass86 said:
I'm bringing this topic up again as I'm going through this dilemma at the moment. My Mazda 3 has just failed it's MOT with a potential £1500+ bill, the car is insured for less than £2500, so probably won't get the work done.

I only use the car off peak times and usually cover between 2000-3000 miles per year (I cycle to work). Would leasing be a more financially viable option?
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Whats the bill for? Trying to think of anything short of an engine replacement that would cost 1500 quid on a mazda 3

Could you buy a better car for the same £1500? I very much doubt it

Leasing would be stupid for that many miles, in a matter of months you'd have paid the £1500. A lease at, say £200 per month over 3 years would cost you £7200 and you would still have to buy the car at the end or keep paying.

Stump up the repair bill
 
As I understand it as a layman, leasing is a way of getting fixed price motoring with zero initial outlay. You never get to own the car.

PCP is your next step, getting fixed price motoring with an initial outlay, and the option to secure the car at the end with a balloon payment - you then own it. Some of the %APR deals can be around 4-5% which makes it comparable to a loan, albeit on a smaller sum. Dealers often contribute to the initial deposit.

Loans allow you to be a cash buyer, but will clearly need to be for the full amount of the car (assuming a savings gap). Dealer sees you as a cash buyer, bank recovers the money from you.

As I understand it (never done it myself), it's PCP and Cash that give you the biggest opportunities to negotiate with the dealers.
 
You have to be very careful with terms+conditions and surcharges with lease cars.

Many seem very attractive but have extremely low mileage allowances. My local Ford dealer has loads advertised yet they are only 7000 miles a year.

They can also rack up a load of extra charges in any defect or damage they don't consider fair wear and tear. My aunty ended up with a bill of over a thousand for blemishes that could hardly be seen by the human eye.

She admits she wishes she had just bought a car as it would have ended up cheaper.
 
Makhaira said:
As I understand it as a layman, leasing is a way of getting fixed price motoring with zero initial outlay. You never get to own the car.

PCP is your next step, getting fixed price motoring with an initial outlay, and the option to secure the car at the end with a balloon payment - you then own it. Some of the %APR deals can be around 4-5% which makes it comparable to a loan, albeit on a smaller sum. Dealers often contribute to the initial deposit.

Loans allow you to be a cash buyer, but will clearly need to be for the full amount of the car (assuming a savings gap). Dealer sees you as a cash buyer, bank recovers the money from you.

As I understand it (never done it myself), it's PCP and Cash that give you the biggest opportunities to negotiate with the dealers.
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A PCP loan will be on the full amount as well.... You pay interest on the whole amount (minus the deposit), not just the but left between the deposit and GMFV.
 
To be fair, I've always been a bit dubious regarding leasing....but the BMW plan looks to be pretty good

take the 4 series gran coupe at £31,625

If you took out a loan for 4 years it would be £752.77 a month (Sainsburys)

However, if you leased it for 4 years it's £349 a month with a balloon payment at the end of £12,195 if you wanted to keep the car (ok, thats with a 5.3k deposit).

Buying
====

48 x £752.77 = £36,132.96

Leasing
=====

£5,399 + 48x£349 + £12,195 = £34,346

as you can see, leasing makes it easier to finance. If you like the car (and lets be honest, a 4 year old 4-series is still a very nice car to own) you can always take out a £12k loan at the end of it. The BMW lease plan seems pretty good to me. Who has £750 a month to spend on a car, or £31k sitting in the bank. Not many people!
 
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glen8 said:
take the 4 series gran coupe at £31,625
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Ok..

If you took out a loan for 4 years it would be £752.77 a month (Sainsburys)
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Right, so this assumes you have absolutely no money and need to borrow all of it. If thats the case then buying a brand new car sounds like financial suicide but we'll go along with it for now. Just remember this point for a bit further on though. Borrowing a huge pile like that unsecured also doesn't get you a great rate, either. If you actually have cash kicking around, which arguably you really should before you start considering buying brand spanking new cars, you need borrow far less and will get a better rate.

Buying
====

48 x £752.77 = £36,132.96

Leasing
=====

£5,399 + 48x£349 + £12,195 = £34,346
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Where does the £12195 come from? Remember, in the example above the entire value of the car is borrowed using a loan, so the person in the example has no money. They would therefore need to borrow the entire £12195 to pay the final payment and keep the car.

Over 4 years this is a payment of £273 and a total repayment of £13122 not £12195.

But of course the other thing you've ignored is that you wouldn't pay £31625 for the car if you were buying it outright (or with a loan, which is far as the dealer is concerned is still outright) as there would be discounts available. I can't work out what they are though as I don't know which model you mean.
 
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