Leasing worth it?

[Jae-So]

I owned a 20 year old Pajero, commuted with it daily and it cost me less than 250 a month maintenance. Probably closer to 80pm for maintenace if it'd to roughly divide it up in my head but I did have a lot of crap to replace on it at one point.

Though it seems owning a 1 series over 3 years, you'll lose about £7k so if the full cost of PCP is £11k over 3 years then you'll lose roughly £4k? But you'll get a brand new car rather than a 2nd hand and of course servicing bills. Examples are a 2019 v 2016 118 m sport.

https://www.autotrader.co.uk/car-details/202107295619766?radius=1500&advertising-location=at_cars&postcode=wv73np&model=1 SERIES&make=BMW&include-delivery-option=on&onesearchad=New&onesearchad=Nearly New&onesearchad=Used&year-to=2019&sort=relevance&year-from=2019&page=1

https://www.autotrader.co.uk/car-details/202108176333984?radius=1500&postcode=wv73np&model=1 SERIES&advertising-location=at_cars&include-delivery-option=on&make=BMW&sort=relevance&year-from=2016&year-to=2016&onesearchad=New&onesearchad=Nearly New&onesearchad=Used&page=1

Assuming 7k miles a year, this seems (roughly) right?

Yeh this is where my head has been at.
PCP to me doesn't seem that great because most people treat it like PCH (they hand the car back) except the monthly tends to be higher.

I guess the saving grace is if PCP works out, you have a deposit ready for the next one (but equally you could save the difference to do that).

 

[Deleted User 298457]

As fox said it's just a form of financing and typically the most expensive. If you are fussy on car then check HUKD periodically. If you want a la carte options selection on a specific motor then you better open up widely. People pay it as for some reason they only see monthly cost.

Don't discount PCP or private bank loan either. 260 a month over 4 years at 2.6% could get you into something really acceptable that you then at least aren't loosing every cent on.

 

[Deleted User 298457]

Yeh this is where my head has been at.
PCP to me doesn't seem that great because most people treat it like PCH (they hand the car back) except the monthly tends to be higher.

I guess the saving grace is if PCP works out, you have a deposit ready for the next one (but equally you could save the difference to do that).

It almost always works out though as that's the way the system is gamed.

 

[mikehhhhhhh]

It seems a bit mad to me to spend so much money on a car that rarely gets used. I tend to look for depreciation proof cars if I know they aren't going to be used much.

But on the other hand, only you can know whether that spend is worth it to you for an entry-level BMW.

I would also at least look at PCP where you'll have more options to exit if your plans change before the term does.

 

[Haggisman]

I never made that claim. I merely said in the past when I had an older BMW it ended costing a lot. In that specific deal/instance I would've been better off with the lease over the 4 years I had it as it would've cost the same and I would've had a better experience.

For clarity, the £250 a month was the cost of the car (£8k) and £4k of repairs amortized over 48 months.

Even £1k/year on repairs for a 4 year old car sounds excessive to me! On something 2-3x the age, then sure, but that's why it's a fraction of the cost to buy

Used buys are under appreciated still. Look at the MOT records on 10 year old Civics, and much of the time they pass only with advisories for things like tyres and wipers (down to the owner, who should spot these beforehand anyway).

Exactly the example I was thinking of, my previous car was a civic, 13 years old when I got rid. Had it for 4 years and it cost me £250 in repairs and £2k in depreciation.

By all means OP get a new car if you want a new car, but its not the financially sound option, and you'll likely end up in another boring "fiesta" (just with a different badge), when you could get something far more interesting for your money going used

 

[Kenai]

The first decision to make is whether you're particularly after a new car or a used car would be ok - as you'll see above a lot of people are making arguments citing better valued used but this is a criticism of buying new more so than an argument against leasing as a financing method itself.

If you are set on the idea of new, you need to then decide if you want a particular new car or just 'a nice car'.

If you specifically want a BMW 118i M-Sport Manual, then you need to make a judgement for total cost of ownership comparing leasing vs PCP vs HP vs loan vs outright purchase etc. and see where you can find the most effective deal financially and just as importantly, that suits you - i.e. a lease might be bad if you think your circumstances might change, as they're typically more expensive to get out of early than other financing methods.

If you'd be happy with 'something like a BMW 1 series' then a lease can sometimes work well when manufacturers are trying to shift stock and there are very cheap deals about - you need to be happy with whatever you find cheap though. Sites like leaseloco can be good for finding these sorts of deals. Even then, it's only sensible to see how else you could get into that car as if leases are cheap, you may find PCPs are too.

 

[Jae-So]

As fox said it's just a form of financing and typically the most expensive. If you are fussy on car then check HUKD periodically. If you want a la carte options selection on a specific motor then you better open up widely. People pay it as for some reason they only see monthly cost.

Don't discount PCP or private bank loan either. 260 a month over 4 years at 2.6% could get you into something really acceptable that you then at least aren't loosing every cent on.

Fair point, A low interest loan is how we originally bought our Qashqai. Luckily it has been really good repairs wise.
I am still not sure PCP is any better though.

Even £1k/year on repairs for a 4 year old car sounds excessive to me! On something 2-3x the age, then sure, but that's why it's a fraction of the cost to buy

Exactly the example I was thinking of, my previous car was a civic, 13 years old when I got rid. Had it for 4 years and it cost me £250 in repairs and £2k in depreciation.

By all means OP get a new car if you want a new car, but its not the financially sound option, and you'll likely end up in another boring "fiesta" (just with a different badge), when you could get something far more interesting for your money going used

Yeh I must admit the repair costs on that car were excessive but it is absolutely true, in fact I got rid of it at around 110k when I quote quoted another £1.5k to £2k for a variety of issues that came on all of a sudden.
I think the main learning is don't buy an older car that is expensive to maintain (BMW, Audi, Merc etc.) so the lease was only really if I wanted something like a BMW.

 

[Jae-So]

The first decision to make is whether you're particularly after a new car or a used car would be ok - as you'll see above a lot of people are making arguments citing better valued used but this is a criticism of buying new more so than an argument against leasing as a financing method itself.

If you are set on the idea of new, you need to then decide if you want a particular new car or just 'a nice car'.

If you specifically want a BMW 118i M-Sport Manual, then you need to make a judgement for total cost of ownership comparing leasing vs PCP vs HP vs loan vs outright purchase etc. and see where you can find the most effective deal financially and just as importantly, that suits you - i.e. a lease might be bad if you think your circumstances might change, as they're typically more expensive to get out of early than other financing methods.

If you'd be happy with 'something like a BMW 1 series' then a lease can sometimes work well when manufacturers are trying to shift stock and there are very cheap deals about - you need to be happy with whatever you find cheap though. Sites like leaseloco can be good for finding these sorts of deals. Even then, it's only sensible to see how else you could get into that car as if leases are cheap, you may find PCPs are too.

Yeh I agree a lot of the points are new car vs used car - to be fair it's a good point as I have argued against new cars myself.

To be honest I just want something a bit nicer and you're right other forms of financing and other car deals may be better.
The BMW was just the best "decent badge" offer I had seen, I am not particularly set on the specific car.

I used to see a lot of great stuff on HUKD but not so much at the moment, it seems the supply constraints mean more demand and less need for deals so perhaps I am better waiting a year for things to settle, both in the new and second hand market

 

[Haggisman]

Fair point, A low interest loan is how we originally bought our Qashqai. Luckily it has been really good repairs wise.
I am still not sure PCP is any better though.

PCP/lease is great if you essentially want a long term hire, with all the ease that offers, but are prepared to pay for that convenience.

If you want car X for Y years, and don't really care how much it costs (within reason ofc), then it works.

Problem is, as others have posted, after Y years, the cycle repeats, and you either have to stump up the deposit again, or hope you have enough positive equity in the car to cover the next one.

Yeh I must admit the repair costs on that car were excessive but it is absolutely true, in fact I got rid of it at around 110k when I quote quoted another £1.5k to £2k for a variety of issues that came on all of a sudden.
I think the main learning is don't buy an older car that is expensive to maintain (BMW, Audi, Merc etc.) so the lease was only really if I wanted something like a BMW.

Yeah, fair point, I've always avoided "premium" marques and gone for cheap & cheerful!

 

[chroniclard]

Trawl lease sites for cars "in stock" , they are often the better deals (not always) just have to have an open mind on what you want.

 

[Deleted User 298457]

Fair point, A low interest loan is how we originally bought our Qashqai. Luckily it has been really good repairs wise.
I am still not sure PCP is any better though.

It depends. There isn't a blanket rule here as different vendors have different offers at different times. Once upon a time you could get an M140i Shadow Edition for £369 deposit and £369 a month. You could get Golf R's for very similar money. That was all PCP.

Lease wise you only need to take a brief look at HUKD history to see what you could get there.

The "kind" of financing is irrelevant only if you think you may keep the car (i.e. PCH is no good) or you want to modify the car (theoretically neither product is any good, and private bank loan is required), or you want flexibility to ditch the car at the most reasonable rate (typically PCP in my experience as you can WBAC the car, clear the finance, and pay the difference yourself).

 

[Hades]

I leased an Evoque almost two years ago. It's going back in a few months. My previous car had an engine failure and I needed a replacement. I couldn't decide what to buy next and a good lease deal came up. An Evoque was a car on my list to try one day. But now I have another car I won't be leasing again. In my opinion leasing works if you are not fussy about a particular car, colour and options. That way you can take a good deal if one comes up. If you are particular about a specific car, colour, options, etc, then it can be expensive. Another downside is making sure it's in the right condition when returning it. It's meant I've been obsessive about not parking somewhere it might get a ding.

The lease was convenient for me at the time. I've tried it now. But I doubt I'll do it again. I prefer older, cheaper, cars that I own outright.

 

[HangTime]

You raise a good point about the market but I actually interpret the situation differently.

• New car shortages are unlikely to last 3 years. So buying a car for the long-term will mean that as soon as the supply situation improves those 2nd hand values will plummet.
• It's a seller's market/bubble for 2nd hand cars right now, so buying one right now at inflated prices is actually worse value in my opinion.

Partly why I say I think it's going to be lease or just keep the Fiesta.

• Shortages are unlikely to last 3 years but the lease might be only 2 years and word on the street is shortages are projected well into next year. So even if there is high depreciation in the second year it will be starting from a higher point than usual due to losing little in the first year.
• The fact there is a current shortage of new cars, means that new cars bought today will have less competition when it comes to selling them in 2 years time. Buyers wanting to pickup a 2 year old car to save cash will find it is slim pickings because there won't be as many 71 plates available as you would normally expect. So yes prices will definitely drop more when the supply chain issues are resolved on new vehicles but there will still be a (unresolvable) supply chain issue with nearly new vehicles. one of the reasons normally you can get big savings on those sort of age vehicles is because there is so many of them, ex-lease etc, people can't price them that high because someone will always undercut them. This time around there simply won't be that many cars on the road to drive prices down. Certainly they can't stay up near the territory of brand new cars (nobody would buy them when they can buy brand new for not much more) but equally I can't see them falling off a cliff.
• I'm not advocating buying a second hand car, I agree that prices are inflated which is why I'm saying there has rarely been a better time to buy a new car (so it is comparable with the lease) given that depreciation is so low. Normally you get decent savings on used cars but in the current market if cars are retaining value then the penalties from buying new are reduced. One of the advantages of leasing is it puts you in new metal but (with shopping around / being unfussy) the potential to beat the depreciation curve. That option has gone out of the window now, people are driving off the forecourts and coming back a year later to offers within 10% of what they paid.

 

[ICDP]

I listed my worst experiences of buying older used cars for ~£10k using dealer finance because at the time a bank loan was not an option. There are positives and negatives of both methods and it will depend on a case by case basis. I included listed costs of interest as well which many seem to forget exists. Unless you are walking in to a delearship with a wad of your own cash most people tend to borrow money for these car purchases. Or even get a poor finance deal from the dealership selling the car.

I had a 2004 Hyundai Coupe and over 3 years it depreciated from £9k (actual cost was ~£10.5k with financing) to £3k trade in price. The servicing, MOT and tyres cost about £1k over the same period. It gave zero mechanical issues that were not covered under warranty. So even a best case scenario that car cost me £7.5K over 3 years with interest, servicing and depreciation.

Also had an Audi A3 that cost a similar price and over 4 years of ownership it depreciated from ~£11k to £2k and servicing and maintenance costs were excessive as so much went wrong with it. Starter moter, electric widows, exhaust, gearbox and other maintenance. Just bad luck on that one.

A perfect (if anecdotal) comparison is a guy at work who buys a "new" diesel car for ~£2k every 1-3 years (depending on how long the latest piece of junk lasts). He is lucky if he makes £500 trade in and more often than not he has to pay for scrappage. Also at least 5-6 times per year he has them in the garage for yet more repairs which runs well near £1K per year on repairs. It is a regular and expected ritual for him to take an MOT 2-4 times each year as he uses them to get a "list of fixes" each year.

He looks at me like I am nuts when I tell him his "perfectly good runabout car" is costing him about £200 every month of ownership.

 

[bimbleuk]

My 2 year PCP on a certain popular electric car has just ended. The next model wasn't available available so I bought the car which had depreciated ~5% at worst for a trade in so no problem having the deposit for the next car. I'll sell/trade it as soon as the next model is available in the UK.

Basically it looked quite expensive on paper but due to the low depreciation over the period and next to no running costs it's been quite affordable. Only negative is the next car won't qualify for the £3.5K grant which applied to the previous car.

 

[Jae-So]

My 2 year PCP on a certain popular electric car has just ended. The next model wasn't available available so I bought the car which had depreciated ~5% at worst for a trade in so no problem having the deposit for the next car. I'll sell/trade it as soon as the next model is available in the UK.

Basically it looked quite expensive on paper but due to the low depreciation over the period and next to no running costs it's been quite affordable. Only negative is the next car won't qualify for the £3.5K grant which applied to the previous car.

Yeh electric cars tend to be good from that perspective. It's just that the nice looking electric cars are quite expensive to start, that's what puts me off. I like the Polestar 2 for example.

 

[Jae-So]

I listed my worst experiences of buying older used cars for ~£10k using dealer finance because at the time a bank loan was not an option. There are positives and negatives of both methods and it will depend on a case by case basis. I included listed costs of interest as well which many seem to forget exists. Unless you are walking in to a delearship with a wad of your own cash most people tend to borrow money for these car purchases. Or even get a poor finance deal from the dealership selling the car.

I had a 2004 Hyundai Coupe and over 3 years it depreciated from £9k (actual cost was ~£10.5k with financing) to £3k trade in price. The servicing, MOT and tyres cost about £1k over the same period. It gave zero mechanical issues that were not covered under warranty. So even a best case scenario that car cost me £7.5K over 3 years with interest, servicing and depreciation.

Also had an Audi A3 that cost a similar price and over 4 years of ownership it depreciated from ~£11k to £2k and servicing and maintenance costs were excessive as so much went wrong with it. Starter moter, electric widows, exhaust, gearbox and other maintenance. Just bad luck on that one.

A perfect (if anecdotal) comparison is a guy at work who buys a "new" diesel car for ~£2k every 1-3 years (depending on how long the latest piece of junk lasts). He is lucky if he makes £500 trade in and more often than not he has to pay for scrappage. Also at least 5-6 times per year he has them in the garage for yet more repairs which runs well near £1K per year on repairs. It is a regular and expected ritual for him to take an MOT 2-4 times each year as he uses them to get a "list of fixes" each year.

He looks at me like I am nuts when I tell him his "perfectly good runabout car" is costing him about £200 every month of ownership.

Yup this is what I was trying to show in some ways. The Fiesta I have is relatively low maintenance and depreciation is relatively small now so there is logic to keeping it.

Fundamentally this whole discussion is about me wanting something nicer and that comes with a cost.

As you highlight above though, buying a second hand car also has a cost of ownership. In my own example a 7 year old BMW cost me £12k in 4 years of ownership, I would be much happier with a lease for that.

I think I have started to look at cars as an expense either way and that expense.scales with how nice the car is and how modern it is.

So whether it's taking a loan, PCP or leasing I think if the car is of a similar quality and age the cost of ownership will be similar.
I think I'll do a spreadsheet and compare some options.

 

[Jae-So]

• Shortages are unlikely to last 3 years but the lease might be only 2 years and word on the street is shortages are projected well into next year. So even if there is high depreciation in the second year it will be starting from a higher point than usual due to losing little in the first year.
• The fact there is a current shortage of new cars, means that new cars bought today will have less competition when it comes to selling them in 2 years time. Buyers wanting to pickup a 2 year old car to save cash will find it is slim pickings because there won't be as many 71 plates available as you would normally expect. So yes prices will definitely drop more when the supply chain issues are resolved on new vehicles but there will still be a (unresolvable) supply chain issue with nearly new vehicles. one of the reasons normally you can get big savings on those sort of age vehicles is because there is so many of them, ex-lease etc, people can't price them that high because someone will always undercut them. This time around there simply won't be that many cars on the road to drive prices down. Certainly they can't stay up near the territory of brand new cars (nobody would buy them when they can buy brand new for not much more) but equally I can't see them falling off a cliff.
• I'm not advocating buying a second hand car, I agree that prices are inflated which is why I'm saying there has rarely been a better time to buy a new car (so it is comparable with the lease) given that depreciation is so low. Normally you get decent savings on used cars but in the current market if cars are retaining value then the penalties from buying new are reduced. One of the advantages of leasing is it puts you in new metal but (with shopping around / being unfussy) the potential to beat the depreciation curve. That option has gone out of the window now, people are driving off the forecourts and coming back a year later to offers within 10% of what they paid.

I think I would go for 3 years lease.
I guess the point I am making here is buying something second hand in this inflated market doesn't make a lot of sense either.

I'm not sure I agree that lower depreciation this year will mean higher residual value in 3 years.
I appreciate what you are saying about lower supply in the second hand market however.

I hope that doesn't come across defensive as I definetely see the logic, I am just not sure it makes second hand more attractive than it was before (as a buyer).
I just need to do some calculations on total cost of ownership for various options - leasing vs buying something used but a bit newer.

I think keeping the Fiesta is the clear winner from a purely financial perspective.

 

[Deleted User 298457]

A perfect (if anecdotal) comparison is a guy at work who buys a "new" diesel car for ~£2k every 1-3 years (depending on how long the latest piece of junk lasts). He is lucky if he makes £500 trade in and more often than not he has to pay for scrappage. Also at least 5-6 times per year he has them in the garage for yet more repairs which runs well near £1K per year on repairs. It is a regular and expected ritual for him to take an MOT 2-4 times each year as he uses them to get a "list of fixes" each year.

This is the classic vicious circle of poverty though, isn't it. The man with well made leather boots buys something once, where as the poor person buys a new pair to replace their worn out pair every year.

A lot of people can afford the better, well-made pair, but insist on their idea of value.

 

[ICDP]

This is the classic vicious circle of poverty though, isn't it. The man with well made leather boots buys something once, where as the poor person buys a new pair to replace their worn out pair every year.

A lot of people can afford the better, well-made pair, but insist on their idea of value.

The point is the person buying the cheaper boots each year could get a loan to buy a more expensive pair. Overall the actual costs may be very similar but he has had a nice pair of boots instead of cheap ones.

I get that it depends on each persons circumstances but so many people make the mistake of thinking a £5k - £10k car with 30,000 - 50,000 miles on it every 3-6 years is a bargain compared to leasing a new one. Ironically more often than not the depreciation/interest/maintenance costs mean they end up being a very similar but never ending cost that never goes away.

So as many have found out they could be in a brand new Corsa/Fiesta/Polo/Golf/Focus that costs ~£200 - £250 per month instead of the 4 - 7 year old version that has no warranty and yearly maintenance, depreciation and loan interest costs.

I sound like a leasing salesman but the reality is I always tell people to look at their specific case scenario. Because borrowing £6k - £7k every 3-4 years to buy a used car may seem practical but look at the bigger picture. Out of all the cheaper ~£10,00 four year old cars I bought only 1 never had issues that cost a fair whack to resolve. £2,000 - £3,000 per year on loan interest, depreciation, maintenance and MOTs were the norm.