Car Leasing

[bhavin85]

Hi Guys,

 

I am thinking about changing my zed fairly soon and always wondered about leasing a car instead of just lumping up cash for the whole thing!

 

I am trying to work out if it makes sense for me to actually lease though, from what I can see all of the leases work of a time of about 3 years (that is extendable ? ) they do charge you if you gov over the 10,000 mile allowance. Now I am only using the car as a weekend car, so I probably only do 3 - 4k a year, which would mean at the end of 3 years the car would have a slightly higher residual value as its been used less.

 

So the part I dont understand here is, if it makes sense to do more or less miles, which is more financially viable ?

 

Lower annual miles means the monthly payments would be lower ? as your only paying off the difference between the cost of the car now and the predicted cost of the car in 2 / 3 years when you hand it back in.

 

I am confused so a helping hand would be much appreciated

 

Thanks

 

Bhav

[M13KYF]

digsy did it for a while, may be worth asking him

[Stew]

For 3-4k miles a year I'd be surprised if it was financially viable. For something semi decent you are paying 5-600 a month on a personal lease. It's a lot of cash if you aren't using it.

[Sarnie]

I've considered leasing a few times but I just can't get my head around it. I obviously understand the concepts but just not under what circumstances I'd need to be in for it to be beneficial.

 

The main benefit is obviously you don't have all your capital tied up in a car, which is very appealing to me whilst the financial sector continues to be volatile.

 

The way it gets sold to you is that you only finance the cost of the depreciation, not the total cost of the car.

 

The downsides to me are the limited mileage and high monthly payments due to the short term of usually 2/3 years plus you need to commit to the payments for the term and face a heavy penalty if you want to give the car back early.

 

If I didn't have the cash to buy outright I think i'd rather get a loan for the full amount and maybe have it over a longer term so that the payments are close to the lease payments, at least then you would own the car outright and could sell it at anytime if needed etc...

[srobrien]

You might also consider PCP payment, lower monthly payments and low deposit, if you want to keep the car at the end just pay a lumper if not hand back the keys, good thing is that they will give you a minumum final value for your car so that you are proteced against negative equity caused by mega depreciation. Works for some and doesn't for others, thats the route I have chosen for my M3 and im pretty pleased so far.

 

R

[SunGodRA]

I've considered leasing a few times but I just can't get my head around it. I obviously understand the concepts but just not under what circumstances I'd need to be in for it to be beneficial.

 

The main benefit is obviously you don't have all your capital tied up in a car, which is very appealing to me whilst the financial sector continues to be volatile.

 

The way it gets sold to you is that you only finance the cost of the depreciation, not the total cost of the car.

 

The downsides to me are the limited mileage and high monthly payments due to the short term of usually 2/3 years plus you need to commit to the payments for the term and face a heavy penalty if you want to give the car back early.

 

If I didn't have the cash to buy outright I think i'd rather get a loan for the full amount and maybe have it over a longer term so that the payments are close to the lease payments, at least then you would own the car outright and could sell it at anytime if needed etc...

 

If you are self employed or run a Ltd Company there are tax benefits to leasing, and you can claim part of the VAT back

[bounty78]

I went for the PCP option when i had my E93 3 series 325i convertible. Was paying £500 a month ..with a 10k a year mileage allowance. Had to say BMW was quite flexible even though i was way over the annual mileage allowance. Had the car for a year and thought to myself..that car is not(never) mine even though i have traded my A4 in for £3k on top of the £6k i have paid over the one year of ownership. And it cost me £500 just to replace the front 2 runflat tyres My work circumstances changed so i decided it's no longer viable to keep paying £500 a month to finance the car.

It works well for people who likes to be seen in a new BMW model every few years or like srobien said you could buy the car outright at the end of the 3 yrs and pay a lump sum balloon payment and keep the car or give it back and use the car as a deposit to refinance a new model. IMO it's another form of car leasing. I did the maths and it work out even if i decide to pay the balloon payment and keep the car at the end of the 3yrs, i would have paid more than £6k in interest above the initial advertised price of the car. At least the Zed is mine and not Nissan's. It's the first time i have taken out a PCP deal and i don't think i will do it again in the future..think i prefer to take out a car loan when i get my M3 someday.

[DoogyRev]

My MX5 I had before the Zed was a lease car, there are pros and cons...

 

I had non-maintained lease over 3 yrs @ £305 a month. I has the mileage upped to 18k, after the 3 yrs and I had paid about 11K in rent so to speak, if I wanted to keep the car they wanted 14k.... mmmm 11+14=25 for a 21k car Also as I was over mileage I had to pay 9p per mile extra and I got stung £185 for Car Park Rash !!!!!

 

I now have a Finance on the Zed ....... which I get to keep after the 3 yrs are up

 

If you are willing to pay the £400+ a month plus 2-4K deposit on a Zed Lease you would be much better off using your Zed + Cash as a deposit on a new one then spend that monthly money on Finance/Personal Loan... at least it will be yours at the end .... and you can Mod it

 

I don't think I would lease again. If you do want to lease, I would phone around all the leasing company's and wait till one turns up which has been returned with a few miles on it (Original leaser did not like, could not afford, defaulted payments etc.). You will get it at a reduced lease price.

[LRF4N]

someone who was looking to lease a car said to me its worth it cos all u pay is the depreciation of the car and hence u can have a brand new car without needing the funds for it. but if they take a 3 yr old car back at the end of it surely they would only do so if they made a profit on it? so u pay more than the depreciation. i think if u were buying a ferrari or something it could make it more affordable but im not sure if i would lease a regular car, would rather buy it outright and mod it lol

 

thats just me tho

[Sarnie]

someone who was looking to lease a car said to me its worth it cos all u pay is the depreciation of the car and hence u can have a brand new car without needing the funds for it. but if they take a 3 yr old car back at the end of it surely they would only do so if they made a profit on it? so u pay more than the depreciation. i think if u were buying a ferrari or something it could make it more affordable but im not sure if i would lease a regular car, would rather buy it outright and mod it lol

 

thats just me tho

 

You finance the depreciation and pay interest on the depreciation figure

[bounty78]

Sarnie well spoken..it's a gimmick when they say u are only paying for depreciation...it's more than that, i am afraid

[Sarnie]

Exactly.

 

This is why i struggle to see the benefit.

 

The only benefit I can see is that, for example, someone who has a budget of say £300 a month could afford a £10k loan to purchase a car outright. But via a lease agreement they can pay £300 a month on the latest car etc but then after 2/3 years they have to give the car back meaning they have pretty much thrown 2/3 years worth of monthly payments down the drain.....

 

I think I'd rather have a cheaper/older car and own it than basically pay the depreciation on the new car for someone else....

[bhavin85]

Ok lots of information there guys thank you

 

Firstly the Tax incentive is one of the reason for doing this, I have a limited company so will put this through there and claim back the VAT.

 

I need to do some reading on PCP and understand how it works, but if its anything like leasing ill look like this after ive read it

 

The reason I am looking into these options are because the list price for the car I want is about £60,000 brand new (ideally id like a new car but if I can lease a slightly used one that might also be an option) so if I am paying off the amount the car depreciates + the apr ontop of that finance I will probably be in a financially better situation then lumping £30k and financing the rest of the car.

 

One thing that does attract me about the leasing is that you can get Maintenance and Road Tax included, for something like a GT-R or a Convertable M3 which are not cheap to Maintain this could definetly be an option.

 

Thanks for all the help chaps