Car Leasing - Why?
I have to ask the question, is leasing a car not just throwing money down the drain?
Is car leasing not just a new badge for Hire Purchase (HP). OK, I know that a new car depreciates in value as soon as one is driven away from the dealer, but if you are paying for a car, is it not still seen as an asset?
There are so many deals around now for new cars with interest free credit, it would surely make more sense to buy rather then lease?
After all with a car lease you have to put down a deposit and pay a monthly charge? So what’s the difference? If I want a new car in three years time I am going to take the car that “I own’ and trade it in!
The other factor with leasing a car is that a car owner is subjected to a mileage restriction. If a motorist goes over the allowance they are clobbered with additional fees.
Personally I would rather pay for a car over a 36 month period and know that it is mine to do what I want with at the end of the three year period.
There are literally stacks of car leasing businesses out there trying to take our money, it is a big market and by all accounts it is only going to get bigger.
Perhaps I am missing the point and need to have a really good look at what the various car leasing companies have to offer, after all your local car salesman is not going to be too up-front if it is costing him commision.
I’d still rather buy a car than lease, but I am not against being converted.
Hi there,
Let’s get a couple of things straight before I post. I am not a car salesman, never have been and never will be. I am not touting for business at all. I am not trying to convert you.
I will answer your post and comment on various sections of it.
I have to ask the question, is leasing a car not just throwing money down the drain?
It is a question that is often asked, car leasing is not for everyone.
If you have the money and you want to own your own car and drive it into the ground then this is the best value for money method. The thing is that most people do not have the money to outright purchase a car and they go into expensive HP agreements.
Is car leasing not just a new badge for Hire Purchase (HP). OK, I know that a new car depreciates in value as soon as one is driven away from the dealer, but if you are paying for a car, is it not still seen as an asset?
It depends if the car is bought for business or personal use. If it is business contract hire then you can offset 100% of the rentals and reclaim up to 50% of the vat.
If it is personal then you take the vat on the chin. A lot of ex company car drivers go into personal contract hire to avoid company car tax.
Yes, every vehicle or almost unless its a classic car depreciates. When you buy or take a car on HP there is only one person taking the risk on the depreciation, that’s you.
There are so many deals around now for new cars with interest free credit, it would surely make more sense to buy rather then lease?
If you look closely at any interest free hp deals you will notice that the car in question always has a fixed price, ie you cannot negotiate on price. So what you think you are saving in interest is already built into the cost of the vehicle.
After all with a car lease you have to put down a deposit and pay a monthly charge? So what’s the difference? If I want a new car in three years time I am going to take the car that “I own’ and trade it in!
You will find that the leasing rentals will normally be 1/3 to 1/2 less on the monthly payment compared to HP. When you take the car to be traded in you will deal with a retail car salesperson on around £10k per annum, he/she make their money by selling you a new car with add ons. You will also only ever be paid trade value for the vehicle, never retail value.
The other factor with leasing a car is that a car owner is subjected to a mileage restriction. If a motorist goes over the allowance they are clobbered with additional fees.
You are correct there is an excess mileage payment, pence per mile. If you do 10k per annum I would suggest you take 11k per annum on a lease as this gives you a safety net.
Personally I would rather pay for a car over a 36 month period and know that it is mine to do what I want with at the end of the three year period.
That is obviously your choice. If you want to own it or have HP then go for it. Remember depreciation though.
There are literally stacks of car leasing businesses out there trying to take our money, it is a big market and by all accounts it is only going to get bigger.
It is getting bigger and there are a lot of cowboys out there. If you do decide on leasing, then make sure the company that you deal with has data protection registration and a consumer credit license.
Perhaps I am missing the point and need to have a really good look at what the various car leasing companies have to offer, after all your local car salesman is not going to be too up-front if it is costing him commision.
Your local car salesman could never beat a leasing price. Your local car salesman might have heard of leasing but could he possibly advise you as to the pros and cons of buying versus leasing? Would he even try? It’s his job to shift metal.
I’d still rather buy a car than lease, but I am not against being converted.
Hi there. I came at your blog doing blog search in Google.
The advantage for leasing a car is that it is cheaper compared to purchasing a new car. Leasing is ideal for people who wants to drive a nice car but has no budget to purchase a new car. I agree with you that buying is better as I would prefer buying my own car. However, there is alternative for people with little money for their dream cars.
Thanks.
Michelle
Not sure if this blog is finished. Car leasing is mainly a business agreement and some of the benefits are in the offsetting of rentals against tax and partial vat reclaim. H.p cannot be directly compared to a lease as it is funding the total amount and would therefore be far more expensive over the term than the comparable “lease”. See the website for further details or call for a more detailed explanation.
http://www.carleasingdirectory.co.uk and click on A-Z of finance