Leasing - a simple explanation for a muppet

ultralaser

ultralaser

ultralaser

Associate
Joined
7 Sep 2014
Posts
1,169
Hi.

I've never resorted to leasing a car before, and to be totally honest my awareness of leasing is close to zero. So I'm looking for the collective wisdom of OCUK to help me before I look at leasing.

What's the deal with the deposit?

Now call me an idiot but when I read "deposit" I believe that means that at the end of whatever contract it is you have with a motor company, you'd be getting that deposit back. But it seems a that isn't the case with leasing a car and many companies call them "initial rental" payments which essentially as best as I can understand isn't a deposit and is just a large payment you make upfront with is non-refundable and you won't get it back (so that begs the question why don't they just roll that into the monthly payments and have done with it???"

What's included and what isn't?

For some reason they all have road tax included (why I don't know). Some offer first year free insurance (again no idea why). None seem to offer servicing for the term of the lease (#wtf?). What exactly can you expect to have with a lease car apart form the bare metal?

"Gap" Insurance..... baby jesus wept.
So my baseline reading of the interwebz tells me that gap insurance helps bridge a divide between what I would pay for insurance normally (which is stupidly expensive) and what I'd need to repay the motor company I leased from incase of an accident. This makes my mind boggle a little, WHY doesn't the insurance I'd be paying for cover this anyway? I just don't understand....

I don't really get it, why I can't walk into a show room, walk out with a car that I pay a base monthly payment, and for that is serviced, insured, taxed, and at the end of a lease if I don't like it I either hand it back or pay for it. It seems simple to me so why do the motor companies make it so hard? Or am I missing something? :confused::confused::confused::o:rolleyes:
 
You get none of the money back, the deposit is not returned.

Tax is always included but tyres and servicing are rarely included and insurance almost never is.
 
[TW]Fox;30469012 said:
You get none of the money back, the deposit is not returned.

Tax is always included but tyres and servicing are rarely included and insurance almost never is.
Click to expand...

Thanks, so it's not a deposit. Tax is included (but we still have no idea why). Serving and insurance sometimes is (but we have no idea why). That's at least some clarity!
 
Also - road tax hasn't been used for many years - It's Vehicle Excise Duty (VED)

You just need to use the correct terms then the definition and reason become obvious.
 
ultralaser said:
Hi.
I don't really get it, why I can't walk into a show room, walk out with a car that I pay a base monthly payment, and for that is serviced, insured, taxed, and at the end of a lease if I don't like it I either hand it back or pay for it. It seems simple to me so why do the motor companies make it so hard? Or am I missing something? :confused::confused::confused::o:rolleyes:
Click to expand...
You can get these deals where everything is included (except fuel). But, you pay a premium for the convenience, so they are never value for money.
 
ultralaser said:
Could you link me to a few examples (not doubting they exist but just havent seem them personally):)
Click to expand...
They are offered on salary sacrafice schemes provided by employers. You pay a fixed monthly fee for the use of car which includes insurance, tyres, servicing and road side recovery.
It almost always works out cheaper to lease the car and source the other services yourself separately.

The advantage of these schemes is most don't require an initial payment and you have a fixed motoring cost for the term of the agreement - i.e. No surprise bills (which is unlikely on a new to three year old car anyway).
 
Last edited:
Regarding the initial payment (aka initial rental, deposit). Take a step back a second and think of it this way, the overall cost of the lease is £8000 over 24 months. You could pay it in 24 even amounts, this would be referred to as 1+23. Or you could pay 9 months up front and 23 following payments at a lower amount per month - a 9+23. But the total cost would be the same.

A lot of companies will offer maintenance at an additional fee, but generally all your get would be VED (road tax) included.


It's also worth noting that many leasing agents/brokers will charge an admin fee which is not included in the rental price. So it could have an initial rental of £800 and 23 payments of £90 a month. But the lease I got agent might also want £500 in admin fees.

Another catch with leasing is extras on the spec of the vehicle. In most/all cases you'll pay the amount the extra costs / the term of the lease. So, say you wanted to add metallic paint at £550. On a 2 year lease it will cost an additional £23 a month.
 
Scottland said:
Regarding the initial payment (aka initial rental, deposit). Take a step back a second and think of it this way, the overall cost of the lease is £8000 over 24 months. You could pay it in 24 even amounts, this would be referred to as 1+23. Or you could pay 9 months up front and 23 following payments at a lower amount per month - a 9+23. But the total cost would be the same.

A lot of companies will offer maintenance at an additional fee, but generally all your get would be VED (road tax) included.


It's also worth noting that many leasing agents/brokers will charge an admin fee which is not included in the rental price. So it could have an initial rental of £800 and 23 payments of £90 a month. But the lease I got agent might also want £500 in admin fees.

Another catch with leasing is extras on the spec of the vehicle. In most/all cases you'll pay the amount the extra costs / the term of the lease. So, say you wanted to add metallic paint at £550. On a 2 year lease it will cost an additional £23 a month.
Click to expand...

Really useful thanks. I didn't know about the admin fees :eek:
 
ultralaser said:
Really useful thanks. I didn't know about the admin fees :eek:
Click to expand...

Some are better than others maybe only £150-200, but I've seen some want £800.

Leasing can work out well for some people, but not for everyone so try not to get sucked in until you've thought about it and worked out all the numbers. For a start, if you're putting down ~£2k as an initial payment - in 2 years time you will be giving the car back and will have to find another lump sum to start again.
 
Think of the initial payment as a bit like a deposit for a mortgage, it makes the deal safer for the leasing company as the negative equity on the car will be lower should you default early in the contract (for the first year or so you'll owe more than the car is actually worth).

You're getting the wrong end of the stick with GAP insurance, it's not to cover the difference you'd pay for insurance, it's to cover the difference the insurance co. would pay out for a total loss, vs how much you owe the finance co.

E.g. you write off the car after 3 months, insurance co will pay out £25k, but the car was worth £30k and you've only made £2k of payments, there's a "GAP" of £3k which needs to be covered
 
Never been tempted myself by leasing. The way I look at it, it's a complicated type of loan to buy a car which in this case you just never own unless you pay the final payment. To some it makes it more appealing and they see it as renting a car.
As you're not buying with cash, however you swing it, it won't be as cheap as just buying outright from day 1.....IMO anyway :D. BUy cash and sell for what it's later worth, the simplest approach, will likely be the cheapest.
Gap insurance for the average person is simply not needed unless you fear certain things and then you should ask whether you should be buying/leasing a £££ car anyway. The risks are calculated and the premium is set so the company still makes a huge profit - only the unlucky few gain, which is the same with most insurance and warranty schemes.
 
Last edited:
You must log in or register to reply here.
Back
Top Bottom