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Depreciation vs lease

Quinnaay

Quinnaay

Quinnaay

Soldato
Joined
10 Mar 2013
Posts
8,047
Location
Rotherham
I'm making a lot of random threads lately, got a lot going off.

So as someone who has always thought leasing is bad due to not owning the car, this year i've lost over 50% of what ive paid for my vehicle/plus repairs/modifications etc (16k) in the space of 2 years and its still knackered forcing me to trade it in/sell to a dealer.

Many people i know and work with now lease cars, i've always tried to steer clear from it but its becoming more apparent especially in this instance its probably not a bad thing to pay a bit more and have theoretically hassle free driving (for a new car under warranty).

Can someone steer me away from entering the darkside and veering towards the temptation or is it actually worth doing these days.
 
When it comes to a new car, someone has to pay for the depreciation, all that changes between different purchase methods is how that's dressed up.

Leasing is typically an expensive way into a new car, especially so if you want a particular car.

Leasing works well for people who just want 'a car' and are willing to take up special offers as and when they appear. There's usually a few offers about if you're not too fussy but for the really good deals you need to jump on them quickly.
 
Really looking at a Golf R, would love one.. isnt affordable to buy one at this current time. I've seen a deal which would cost 10k over 2 years. If i could have had this opportunity prior to my old car and new the situation i would have 100% paid the extra 2k to drive the Golf R for 2 years over my old one.. Hindsight's a wonderful thing, that said i get not all cars will cost/depreciate to that value. But i do want a nice car, not a nail :)
 
£10,000 over 2 years for the Golf R isn't anything special, they've been as low as £7,000 within the last year.
 
Kenai said:
£10,000 over 2 years for the Golf R isn't anything special, they've been as low as £7,000 within the last year.
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I'm not saying it is, it's just what I've seen I haven't looked into lease deals before. Knowing that gives me a good figure though and id certainly snap at 7k. Any ideas where to look or are they just random short term offers
 
If it's £10k for a 2 year lease, generally speaking if you bought it outright and sold it after 2 years it would cost you less than £10k (ie purchase price less sale price after year 2).

The benefits you refer to, warranty, no Mots etx, are benefits of a new car benefits, not leasing. You'd get the same if you paid cash.

The caveat is that leasing gets you into the car more easily, as you don't need the £30k cash upfront. Most people see a lease as a monthly amount and don't consider the bigger picture.

If you're set on a Golf R, make sure you consider other methods of finance and do the sums. A bank loan for example may be cheaper and more suitable. It may not, but make sure you consider all options.
 
Kenai said:
Leasing works well for people who just want 'a car' and are willing to take up special offers as and when they appear. There's usually a few offers about if you're not too fussy but for the really good deals you need to jump on them quickly.
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Do this or otherwise look at the alterntives really. Follow the deals, don't add any options (including paint if it costs) and enjoy driving something that you wouldn't have normally gone for. If you pick the car you are unlikely to get a good deal. The general guide is to try and get as close to 20% of the list price, every now and then there are cars below this.

This time I went for a Volvo S90 and got a deal that is about 19% of list.
 
[TW]Fox said:
It's not way more. You're looking at the monthly payments instead of focusing on the total cost.
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Well yeah if the monthly payments are way more plus I'd be paying for all the maintenance and services when comparing to leasing it makes it a lot less unaffordable. I looked at say a 20k loan and the payments are around 550 per month for 3 years. Admittedly, you keep the car at the end but 300pm on a lease with most things included hassle free looks a lot more attractive when in reality the depreciation and bills appesr to be close to the total expenditure anyway
 
What car have you bought for 32k that's cost you 16k in 2 years??

I can't understand why people lease cars they can't afford, buy a car you can afford... end of
 
Maybe a peugeot, I briefly, very very mind, looked at a 308Gti, when I researched the depreciation I nearly died. It lost around 70% in 3 years. Manufacturers site confirmed if you got a PCP quote.
It mean't the cost of ownership was horrendous.

He also mentions modifications so without knowing what its hard to tell if thats a significant cost, and valid to include in cost of ownership
 
[TW]Fox said:
Umm this is kinda a big deal? You end up with an asset worth 5 figures..
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But your paying for it.. then you've lost near the equivalent on depreciation and have all the expenses and services/tax etc to pay and sell it if that's what you want. As someone who likes to chop and change it's beginning to make a bit of sense going down the lease route.. does need a lot of thinking about and finding the correct deal though.

As for the comment of what car I have lost over 8k on its a VW Scirocco and that's not all in depreciation roughly 6k is depreciation the rest is trying to fix the issues it's had and it still needs a fair chunk more throwing at it. A car within warranty would have save all the hassle and headache.
 
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Doesn't make sense to me
Fixing things outside warranty, how old is it?

And you start by saying £16k now its £8k, or is that £6k each year for 2 years and £2k each year for 2 years, or are you grossing up 1 year of £8k to being £16k.

I am struggling to see how you are losing £6k depn per year on a scirocco thats out of warranty, and needing to do £2k of repairs a year as well.

How are you going to handle your chopping and changing if you sign a lease, about the worst thing you can do is try to get out of a lease early.
If your saying you would hold any car for 2 years then I am really struggling with how its working out so expensive for you.

Leases are typically cheap when manufacturers are trying to get a certain car out, either towards end of line, or its not selling well, or numerous reasons.
They dont want to sell them cheap off the forecourt, especially when a new model is coming, it makes the new ones look bad value.
So they pass them off on deals to the lease companies.
You can also source them from places like drive the deal, but often by the time a mega deal is obvious the stock is allocated so you may have missed the deal.

Outside the above scenario the only difference is who is financing the purchase.
A lease company may get a slightly better price than you, but wont be much unless you literally go and pay full retail.
They then finance the car (cost1), add some element for profit (cost2), estimate residual value at auction (deduction1) and calculate (cost1 + cost2 - deduction1) / divided by payments.
The only way this can work out significantly cheaper than you doing the exact same thing is if you cannot borrow money at a decent rate.
The absolute key to this is the estimated residual value at the end at auction. Its why it can be cheaper to lease a BMW 3 series than a Mondeo, because the BMW holds the value better, so the cost to them over 2/3 years is similar/lower, its absolutely the same if you go and buy it outright!

This is a good place to start, have a look how different marques and models vary. https://www.fleetnews.co.uk/car-running-costs-calculator
Eg

TT Coupe 1.8TFSI 180 SS Sport 6 18MY, 41% at 4yr 80k (list £28595, res £11825)
Golf Hatch 3Dr 2.0TSI 230 SS GTi 6 18MY , 31% at 4yr 80k (list £28205, res £8650)

I don't think they list scirocco any more as its now defunct I believe (which can also hit values!)

At the end of the lease you run into a new scenario. If you have exceeded fair wear and tear (the definition of this you can google) then you will be charged fees. They can be very high, but you can immediately get out of them by getting them repaired before they come and inspect and collect.
 
:confused: you are paying depreciation on a lease. The dealer isn't giving you a new car at a loss. It's just included in the monthly cost. I believe you also pay tax, servicing, maintenance etc on a lease. But how much maintenance will a new car need? and that is not relevant to the financing /purchase method.

The only way to avoid depreciation is to buy a used car. It will still depreciate though, just by a lesser amount.

I appreciate you may be able to afford the monthly lease but not monthly loan repayment, but you are kidding yourself if you think leasing will be leasing in the long run unless as above you take on whatever is surplus at the time and accept anything.
 
jellybeard999 said:
:confused: you are paying depreciation on a lease. The dealer isn't giving you a new car at a loss. It's just included in the monthly cost. I believe you also pay tax, servicing, maintenance etc on a lease. But how much maintenance will a new car need? and that is not relevant to the financing /purchase method.

The only way to avoid depreciation is to buy a used car. It will still depreciate though, just by a lesser amount.

I appreciate you may be able to afford the monthly lease but not monthly loan repayment, but you are kidding yourself if you think leasing will be leasing in the long run unless as above you take on whatever is surplus at the time and accept anything.
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So in these scenarios then middle ground comes in. Ie PCP, its almost the perfect hybrid for being able to drive a car you cannot really afford.
Basically you pay the depreciation and the cost to borrow the money over the term of the deal.
You can then hand it back (same risks as a lease) or buy it and use that to trade against another car or keep driving it.

Its why PCPs are so popular. It feels like a cheap way to drive a nice car. Its not cheap but its comparatively low outgoings compared to the traditional loan to buy a car.
 
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