To Lease or to Buy. That is the question ??????

[Mike_5041040]

The time is fast approaching that I would normally part exchange my car for a newer model. I usually would try and to find a low mileage demo or pre-reg car. However, after a bit of thought one evening ( a dangerous thing I know ) I added up all the depreciation that I have incurred over the last four vehicles alone and was horrified !!

My question to anyone that knows is " Is leasing a car for three years a better option to avoid depreciation. Does it really matter if you don't actually own the car ? "

I've wrestled with the figures for a few days now and can't seem to come to an obvious conclusion on my own.

I've seached through the 'towcar forum' but can't seem to find the subject of 'leasing' being discussed before.

Your thoughts would be welcome.

Thanks,

Mike

 

[Colinn]

Hi Mike,

I've pondered this one over the years - and my main conclusion has been that whichever way you jump owning cars is a no-win situation!

Depreciation is a shocker, but then again so is paying out monthly fees, with nothing at the end of it...

If you lease, you may be able to pocket capital out of the equation which you'll probably spend on something else, so it will disappear.

Then you'll be left with always having to face monthly payments - can you always be sure you can meet them, perhaps when in retirement? If so, then maybe you should go for it.

But at least with part exchange, you retain a certain amount, albeit declining, of capital. And you always have the option of keeping your existing car if you can't afford to upgrade. Better than nothing, you might think.

Sorry, it's not an accountant's appraisal - just a gut feeling!

 

[Steve L]

This is a real tricky one that as Colin has said you have to balance all the balls.

Having a car that belongs to you is good as you do have a vehicle to use and are not tied into handing it back every three years and re-negotiating a new lease which is often not as lucrative as the first one, as the hire company then know that your hooked!!

As Colin has said if you don't find a replacement at least you can hang on to the current car for a year or so.

Depreciation is the bain of our lives, I buy cars five or six years old with low mileage purely because the bulk of depreciation has gone by then and I only loose around

 

[MONKEY1]

Mike,

There was a bit "Posting" about Depreciation recently and to avoid having to retype it all I done a bit of a cut and a paste in order to answer your questions.

Firstly leasing as a private individual is different to leasing as a "company driver" in particular as a company be it your own or working for the company the vehicle would usually have VAT on its payments claimed.

As a "company driver there are essentially schemes open to you, these are HP with/or with out a peppercorn rental, Lease/ lease purchase and future balance payment leasing (the later is very complicated and takes advantages of future prices and other things such as investments in the stock market etc.

As a private individual the main way of leasing a car is a PCP which takes into account a number of factors in order to lower the payment to you. Does it remove depreciation well no it just hides it better.

I spent three years as a fleet manager and one of the worse jobs in the world is lease car underwriting - that is trying to guess the future price of the car that you buying in order for you to finance it.

Essentially what you do is take the price and add its "service costs and tax and tyres over a period - say three years and then predict it's resale value and divide the difference over the 3 years.

You can make no money or a mint there is very little in between. You state that your horrified at depreciation. Well there are several ways to lower the effects - the problem is people buy cars with emotion not with an accountant by their side !!

For instance Depreciation is known as a having a wave effect the first is when the vehicle is registered the second is at years 3 -4 and 6 or 7. There are several things that you can do to minimise the effect of "depreciation".

These are and usually in this order of effect

Brand

Model

Class of Vehicle

Colour

Fuel

Spec

I would be interested to know the vehicles that you have brought and then I could give you a "trade or insiders "view

Monkeys husband

 

[Mike_5041040]

Thanks for taking the time to reply everyone, much appreciated.

In answer to Monkeys husband, my previous four vehicles have been 2 x Volvo V70's and 2 x Saab 9000's. I am now considering changing to a Sorrento because when I next change the caravan, I'm pretty sure it will be heavier than my current Bailey Ranger.

Thanks again,

Mike

 

[MONKEY1]

Assuming that you cars are well maintained and in good condition then a dealer should offer you good money for the Volvo's particularly estates (I hope they weren't white?)

The problem for Volvo owners is that the nice family owned dealerships are being "compulsory purchased" by Fords PAG by going direct they can control prices better and make more money.

The Saabs well that's another story and if you want to lose money quickly this could be the way to go typically they suffer very large year one depreciation curves.

As for you choice of tow car then the Sorrento is a good choice. However the dealers are very good at offering 3k less than they are really worth because 1. Your there to buy another at trade in time and they know it. 2. They are very good at driving the market down with hundreds of pre reg Sorrento's floating about.

Lastly and I'm not trying to be anti 4x4 here but if you are going to purchase one then bare in mind that the majority of lease underwriters are being very cautious with expected used values; this is entirely because of Mr Brown and that we don't know what the market place is going to be like for 4x4 's in 3, 4,5 years time.

The RAC foundation recently stated that they expected 4x4's to be singled out more than just large vehicles. If Kia is offering a good PCP then it may well be a good safety net.

MH

 

[Mike_5041040]

Assuming that you cars are well maintained and in good condition then a dealer should offer you good money for the Volvo's particularly estates (I hope they weren't white?)

The problem for Volvo owners is that the nice family owned dealerships are being "compulsory purchased" by Fords PAG by going direct they can control prices better and make more money.

The Saabs well that's another story and if you want to lose money quickly this could be the way to go typically they suffer very large year one depreciation curves.

As for you choice of tow car then the Sorrento is a good choice. However the dealers are very good at offering 3k less than they are really worth because 1. Your there to buy another at trade in time and they know it. 2. They are very good at driving the market down with hundreds of pre reg Sorrento's floating about.

Lastly and I'm not trying to be anti 4x4 here but if you are going to purchase one then bare in mind that the majority of lease underwriters are being very cautious with expected used values; this is entirely because of Mr Brown and that we don't know what the market place is going to be like for 4x4 's in 3, 4,5 years time.

The RAC foundation recently stated that they expected 4x4's to be singled out more than just large vehicles. If Kia is offering a good PCP then it may well be a good safety net.

MH

Thanks very much for such a comprehensive reply MH.

I appreciate it.

At the moment I'm edging towards buying rather than leasing but will look for a slightly older vehicle than I usually buy.

Regards,

Mike.