IME the craziest deals on cars have tended to be leases. The picing on the best deals some times makes no economic sense. A better spec car can sometimes be cheaper than a lower model. Leasing costs may sometimes be cheaper than the depreciation on a discounted new car.
But you have to be careful.
- Mileage - headline deals tend to be for the likes of 5000 and 8000 miles
- Remember to include the 'initial rental' - this may be high
- Watch for 'arrangement' and 'documentation' fees
- The car is not yours - and when you hand it back you may charged for minor damage and discrepancies - policies vary -some people seem to get hit hard on these others breeze through with nothing to pay. Car park dings and scuffs that you might not personally bother about if it was your own car may well have to be fixed or paid for.
- Options will cost you disproportionately
- VED is usually included
- The owner of the car is the finance company - make sue your insurer is happy with that
- Servicing can be restricted to dealer servicing (maintenanance might be included in the lease for an extra payment - do your sums - and sometimes full maintenance includes tyres).
- Small print may put some requierement on replacement tyres
- If the car is written off early in the lease then the lease will likely be terminated - remember if the 'initial rental' was high - eg. 9 months - you have effectively lost that and will likely have to pay again to start a new lease.
If thinking about this route - add up all the payments -remember on a 24 month deal with a 6 or 9 month initial rental the effective monthly cost is 21% to 29% higher than that headline figure. Also remember to cehck VAt is included in tha headline figure or (probably) not.
Finally - things in the car market are probably going to get a bit mad in the coming months - this could mean there are utterly crazy lease deals on some models over the coming months - or conversely that there are no decent deals on some models.
Some excellent advice there. There’s only one thing I would add, and that is buy GAP Insurance - but shop around, try PistonHeads ALA - don’t buy it from the supplying dealer.
I always thought GAP insurance was a bit of a swizz, thinking that the insurance company would settle at the market rate and that it would be at the cost of a replacement.
I was wrong. Very wrong. Very very wrong.
I have only ever leased one car and it was stolen at 17 months old, I then realised the value of GAP insurance as the settlement was nowhere near the cost of a replacement.
The insurance company told me the settlement figure within a few days of the car being stolen, and that was £9k less than the cost of a similar car on Autotrader.
It took another 5 months to get a settlement figure from the finance company, and as the insurance pay the finance company you don’t get anything back for you to buy another car.
Eventually you receive a credit or invoice from the finance company depending upon whether they owe you or you owe them - 5 months is a long time to wait to find out!
If you own the car (or have an unsecured loan on it) then you receive the money as soon as the insurer is ready to pay out, and can then use that settlement to buy a replacement.
If the insurance settlement value is less than you need to buy a similar car then you can choose to buy a less expensive car, and avoid taking the direct financial hit.
With a lease or secured finance you need to be ready to make up the shortfall, and have money ready to start again to buy a car or make an initial payment on finance.
So in my scenario on top of the £4,600 initial payment, there was a £9,000 shortfall in value and, if leasing another similar car £4,600 towards another similar car. Ouch.
Fortunately the finance company had the car on the books for less than I would pay if I bought a similar car from Autotrader, but I only found that out 5 months later.
That’s where GAP insurance really helps. Many people may struggle to recover, others will manage but it will really sting. For a few hundred pounds it removes either scenario.
PS There was nothing complicated about the theft, the insurance were ready to pay straight away, the 5 months was driven by standard process for the finance company.
