Car leasing vs buying

[kinboshi]

Good post Matt.

Barry, what sort of car are you afte? 

[DaveShoelace]

Good post Matt.

Barry, what sort of car are you afte? 

Just a reliable city car to be honest. We are frequent users over small distance, the missus needs it for work which is 7 miles away, we only go on longer journeys about once a month max.

The ford fiesta seems to be the one that is ticking boxes atm, though there do seem to be a lot better cheaper options like the VW Up.

[DaveShoelace]

And thanks to Matt for that very detailed and thoughtful reply. Lots to digest.

[BulldozerD]

Leasing may become more appealing if you have a business to put the expenditure through and are VAT registered etc. My preference is to buy a nearly new car though, much better value on the whole.

[Nakor]

Good post Matt.

Barry, what sort of car are you afte? 

Just a reliable city car to be honest. We are frequent users over small distance, the missus needs it for work which is 7 miles away, we only go on longer journeys about once a month max.

The ford fiesta seems to be the one that is ticking boxes atm, though there do seem to be a lot better cheaper options like the VW Up.

Some/most lease deals now you have to confirm that you will run the car for x number of miles over 3000 revs or some such.
Might be an issue if you only going 7 miles.

[Skippy]

Good post Matt.

Barry, what sort of car are you afte? 

Just a reliable city car to be honest. We are frequent users over small distance, the missus needs it for work which is 7 miles away, we only go on longer journeys about once a month max.

The ford fiesta seems to be the one that is ticking boxes atm, though there do seem to be a lot better cheaper options like the VW Up.

Some/most lease deals now you have to confirm that you will run the car for x number of miles over 3000 revs or some such.
Might be an issue if you only going 7 miles.

How would they ever know?

[Nakor]

Good post Matt.

Barry, what sort of car are you afte? 

Just a reliable city car to be honest. We are frequent users over small distance, the missus needs it for work which is 7 miles away, we only go on longer journeys about once a month max.

The ford fiesta seems to be the one that is ticking boxes atm, though there do seem to be a lot better cheaper options like the VW Up.

Some/most lease deals now you have to confirm that you will run the car for x number of miles over 3000 revs or some such.
Might be an issue if you only going 7 miles.

How would they ever know?

certain faults attributed to short journeys it seems. Exhaust system, fuel management failures and the like. Just another thing they can wriggle out of paying.

[Simon Galloway]

For a Ford Fiesta or similar nearly new, how about a car supermarket such as Motorpoint? A £16k (lol @ paying that) example on a 12 plate with 10k miles for £9k

I don't know very much about the pros and cons of buying this route, but I have bought my last couple of cars from them.  Really hassle free P/X and purchase, aftercare is non-existent, they seem to be happy to allow you to roll it off the forecourt and then point you back towards the marque main dealer for anything else.  I also assume that most of their stock started off life as a hire car, which may or may not be a problem depending on how long you intend to keep it.

[BulldozerD]

For a Ford Fiesta or similar nearly new, how about a car supermarket such as Motorpoint? A £16k (lol @ paying that) example on a 12 plate with 10k miles for £9k

I don't know very much about the pros and cons of buying this route, but I have bought my last couple of cars from them.  Really hassle free P/X and purchase, aftercare is non-existent, they seem to be happy to allow you to roll it off the forecourt and then point you back towards the marque main dealer for anything else.  I also assume that most of their stock started off life as a hire car, which may or may not be a problem depending on how long you intend to keep it.

they are very tight on the part-ex but this is a very viable option for popular cars like Fords - as an alternative to part-ex you can always see what webuyanycar or something similar will give you.

[david3103]

Lots of ways to sell privately, including eBay and wewillbuyyourmotor.whatever, having cash still has an edge these days.

It's also worth looking at Ford Direct cars, a quick search suggests a 13 plate Fiesta Zetec can be had for just over £10k and it will came with a lot more accessible warranty than comes from a Car Hypermarket. I've had a few via this route over the years and they have all been ex-management cars.

Personal Contract Plans (leasing is a business facility) should be viewed only on the basis that you are paying a cost per month for the use of a vehicle and the cost of closure needs to be borne in mind (the return clause will have a lot of costs attached to any body/interior damage and mileage)

Probably not explaining this as well as I used to back in the day when I was in the industry, but essentially a PCP is a loan to cover the cost of the car which is replayed by a) the monthly payments and b) the value of the car at the end of the agreed term. It relies on that value being predictable and recoverable at the termination hence the issues on condition and mileage.
Having maintenance rolled into the monthly payment just provides the finance company/rental company with an extra area from which they can extract a profit.

[BangBang]

Not sure about this country, but in the U.S another easy and cheap way to lease a car is taking over an ongoing lease from someone else.. They usually give you an incentive to take over the lease and also no money down.. Be careful though for off-loaders though... 

[pokerfan]

You can get a brand new 107 for £6k

0 street cred obv, but ok for 14 miles a day.

[MPOWER]

It's not a cheap way of getting a better car. It's actually really expensive as you're owning a car during the worst of it's depreciation years then you give it back just as it slows down a bit and swap it for another new one.

All that should matter is total cost of ownership. If you're leasing a car for 3 years at £300/month then it's costing you £10800 simple as that.....

Oh apart from the 3 payments deposit you have to make which makes it £11700....

The good thing with leasing is you know exactly where you stand. 3 up front payments, 36 monthly payments, give the car back, simple.

Personally I've always gone for financing through a dealer as this works out cheaper than leasing. I can't tell you much about leasing but I can definitely help with financing through a dealer (which is what M Power will offer). You can look at dealer financing the same way as leasing because at the end of it you can just give the car back.

You'll definitely get a much better deal if you go to a dealer but you've got to be really careful. The salesman will sell you the car then someone else sells you the finance. That's generally how it works at the big dealerships. M Power's lot all have separate finance sections now because it's such huge business. You'll get a good deal but don't accept their first offer. I promise they can beat it.

When you go to a dealer and sign up for a finance deal they completely muff you with numbers. I'm really good with numbers and I can say without doubt that they had me tied up in knots. How some people who are a little bit less savvy (or just plain stupid) go on I'll never know, they must just sign up for anything.

When they give you your quote just go away and think about it for a while. Add the numbers up carefully and check that all important 'total cost of ownership'. Don't sign for it without going away and checking it all over with a calculator and a pen and paper.

M Power will doubtless offer a good deal on a BMW but you'll definitely get better if you put in some legwork and borrow the money elsewhere. Sainsburys will do a decent lump of a loan at around 5% and there's no way Sytner will get near that no matter what they say. Just check the APR and then work out what it costs overall. That being said BMW deals are very good just not the absolute best.

When I bought my latest BMW I haggled like crazy over the finance. They're desperate to sell it to you. I got the total cost over 3 years down from his initial "brilliant deal" by around £2.5k just by being a bit pushy and showing him how much it would cost by going elsewhere. The APR dropped from over 10% to 7.2% which on a car of any decent value is a big chunk of money.

I eventually took the BMW finance because they threw in a few extras if I agreed to take it. 1 month later though I took a different loan out to pay that off and will save £2k over 3 years.

The problem with financing a car yourself is you have to borrow the whole amount. On a £30k car that's a big loan. If you finance or lease it you only have to borrow enough money to cover the depreciation and interest on the difference. Don't forget whatever happens you're still paying interest on the full value, not just the bit you're paying off. They'll try to baffle you by making the monthly payment look appealing but please don't forget to account for your deposit in the monthly calculation because you won't be getting that back at the end of it.

Don't be shy about talking to the finance companies by the way. They don't only finance brand new cars. If you find a reasonably new car and approach a finance company they will often buy it on your behalf and lease it to you. That obviously saves a big lump of depreciation. The company I've financed my car through will finance pretty much any car as long as it won't be more than 8 years old at the time the finance deal finishes. I could've bought a 5 year old car and financed it for 3 years if I really wanted to.

If I was you I'd recommend working everything backwards. Decide how much you're prepared to lose on a car per year and then take it from there. If you're buying a £30k car then you know that in 3 years it's going to be worth around £15k so at best it's going to cost you £5k/yr in depreciation. Factor in interest at 8% which is £1200/yr on the bit you never pay off and maybe around £600/yr on average for the bit you're paying off and suddenly you're at £6.8k/yr or £560/month for a £30k car. Now what they do is persuade you to put a deposit down to reduce your monthly payments. Do not be fooled by this!! if you put a £6k deposit down your payments would drop to maybe £380/month and suddenly you think you've got a great deal but chances are you'll never see that deposit again so when you come to buy your next car you've got no £6k to put down and are faced with £560/month to get back to where you want to be. So if you always want to be in a nice £30k car less than 3 years old you're going to be spending around £7k a year for the privilege unless you can buy it outright.

All this is just words of warning. There are some great deals to be had from dealers especially around 'new reg' time but just don't rush in to anything.

One more thing with regard to Sytner (M Power). At new reg time they aren't shy of pre registering a few cars to get their numbers up. That means that if they're a bit short of their targets at the end of March/September they'll buy a load of new BMWs or Minis and you get huge savings. I saved £12k off the book price on a car which had 10 miles on the clock. This means I'm looking at much lower depreciation than I would have been which turns in to big savings per month.

If you choose to go the dealer financing route let me know and I'll happily chat you through what I did. I'll also tell you that although I love my shiny new car with hindsight I should've got one a year or 2 old!!! Be very careful buying new!!

Good luck.

Matt that is a very good post. Accurate and polite.

Just be careful with 3+/6+36 deals If you fall on hard times you need to pay up the contract.
With a dealer financed regulated agreement you can get out of the deal at any time.
You also have your half and thirds. Pay for half the car including intrest charges and you can walk away.
Just make sure any dealer you buy from, the finance is on the car and NOT done as a personal loan.     

 

Good post Matt

Regards

M

[The Baron]

If it's a fiesta have a look at non-dealer options such as large brokers and leasing companies that offer pcp.

It will almost certainly be cheaper than your dealer.

[DaveShoelace]

Sincere thanks to everyone on this thread, I have learned a great deal from all the posts and feel like I was in a position to make the best choice I could.

In the end we went with a nearly new (2013, 2900 miles) Fiesta from TC Harrison on a PCP deal. We managed to get a load of extras thrown in including rear parking sensors added, three years free breakdown cover, a really good deal on our old car as part exchange (£1,700 - about double what we expected to get from it). Managed to get the payments under £100 a month and we have the option to buy in three years for £4300. If we end up buying it, it will have cost us just under 10k.

I recognise the benefits of buying outright, but for our personal circumstances this was perfect. Neither of us are particularly car savvy, so the fact that we get both a new car with full warranty and the opportunity to exchange it in three years for another new one gives me piece of mind. The only long distance drives we tend to do is my wife visiting her folks in Norfolk so I dont have to worry about her breaking down. The whole reason we decided to get a new car was we had a recurring problem with ours that always seemed to kick in when we really needed it.

The wife loves it, it is the perfect car for us. She likes pretty cars and this has lots of great mod cons, especially lots of smartphone features. I don't care about cars at all and just see them as functional and this is probably the least embarrassing motor from her list (We almost got a Fiat 500). It should be very economical and I reckon it will not decline too much in value. 

Thanks again, I look forward to bumping this thread in three years when I reveal what a con PCP is.

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