Info on leasing a car

[Felstmiester]

Never appealed to me. Always purchased cars second hand from private sellers and never really had finance on a car.

But seeing the ever growing popularity of people leasing nowadays and the prices I've heard of me and the wife are considering our options.

I'm not that familiar with any part of it to be honest. I've heard people talking about claiming vat back. But not sure if this applies only if your vat registered and vehicle is being used for business.

Am I also right in thinking the car your leasing must have to be insured seperatly. My wife is insured through my traders insurance at the moment.

What have you got to look for in these lease deals. She/we will not be clocking up loads of miles even tho this will be our family car.

I had a quick look and found a site where you could lease a new A class for under £160 pm at 10k a year on a two year lease.

Any pointers would be appreciated. Thanks.

 

[Paddcomp]

I keep getting tempted as it seems a cost effective way of getting in a new car.
The VAT would be subject to business use for a VAT registered company, then you'd have to consider BIK tax. Talk to your accountant!
Personal leasing is like other forms of finance where you are responsible for insurance and maintenance. Just compare the numbers to buying only for comparison.

 

[Rory]

I don't know about the VAT issue but even if it's possible to recover some/all of the VAT then the vehicle would preumably need to be leased in the company name.

On insurance, you'd need to make sure the trader policy covered it. Some domestic insurers are funny about it, but I expect a lot of people probably don't tell their insurer that they don't own the car. You probably don't have this anyway, but the replacement new car if written off within 12mths that most insurers offer doesn't generally happen with lease. You probably should take GAP cover. That may not be possible on a company lease.

The downsides in my mind are:
- leasing isn't flexible - basically you have to assume you'll see the lease out. That may be fine, but if your circumstances change then you're a bit stuck - you can get out, but it's expensive.

- the car has to go back in pretty good nick or you'll get surcharged.

- if you want a car with options then generally most, if not all, of the cost of the option is charged over the lease so they add a disproportionate amount to the monthly cost.


Having said that, leasing can look good - I think most people are in denial about how their car continues to depreciate. I passed on a recent deal where I really should have taken the chance to replace my car and since then it's suddenly started to feel very old!

 

[Yugguy]

The more you pay up front the less you pay a month. Experiment with quotes for 24, 36 and 48 monrhs cos you are basically paying off the depreciation and different cars depreciate at different rates.

 

[Felstmiester]

I was looking at buying a used c220 on around a 59 plate. But for the money something like that is going to cost i could lease a newer car for a few years at least.

 

[Yugguy]

You couldnt lease the new version of my fully loaded low mileage mint 58 plate c220 elegance for what it cost to actually buy it.

A seat ibiza 1.2 fr perhaps.

I went through this during the long process of changing my Focus.

 

[moonloops]

If it appreciates, buy it. If it depreciates, lease it

Getty

 

[Deleted member 113659]

Some amazing deals here:

Mercedes | Make | Car Leasing

We've just got the outgoing E Class for £209 per month. It's a no brainer for us. The total amount payable is less than the deprication over the term.

Most include road tax and some include servicing.

Just insurance and fuel to pay for. And GAP insurance too. Feel free to PM if you fancy a phone call to chat further.

Ant.

 

[Red C220]

Forget putting it through a business, what you pay in taxes outweighs any possible saving you could make. Plus on a private car that has personal use you can only reclaim 50% of the VAT anyhow.

Contract hire is what you are thinking of not Leasing (which is often incorrectly used to describe a contract hire arrangement). As the name suggests, you are effectively renting or hiring a vehicle for a pre determined contract. These contracts are generally not very flexible so if a need to end it early arose you'd have to buy out the rest of the agreement at a penalty, say 50% of future rentals.

The plus sides are this:-

It's often a good way to get into a car that you might not have the capital to buy.

Deals can be had when manufacturers are trying to promote particular models. To a degree that the term payments of a hire agreement maybe less than the amount the vehicle depreciates over the same term.

Heavily discounted outgoing models can be incredibly cheap (see ants link for an example).

It's fixed price motoring for a fixed period determined at the beginning of the agreement.

It's great if you want a brand new car every 12, 24 or 36 months.


The down sides:-

Options are added to agreement rate at full depreciation over the term. EG, you add £3600 worth of option to your new contract hire vehicle over a 3 year term, your monthly payment increases by £100pm, there is no residual value for options allowed. So contract hire lends itself to base spec vehicle or Premium/plus packs. But stay away from the options list.

The car has to be in very good condition when handed back or you may receive financial penalties.

If you want to keep a car for a long time or have the flexibility to change then contract hire is not the way to go.

You may not have full flexibility on what colours/models are available., or your choice may be limited.

If you have a private number plate you may have to transfer the ownership title of the plate into the name of the contract hire provider and you could lose the plate if the car was repossessed or handed back early.

 

[stevehg]

Some amazing deals here:

Mercedes | Make | Car Leasing

There you go E63 estate £5K down and £540 a month for 10K miles, tempted myself

 

[Red C220]

Quote:
If it appreciates, buy it. If it depreciates, lease it

Getty

A point about this oft used quote.

When JPG made this statement it was based on a premis that all payments made on the contract could be offset against corporation taxes and all sales taxes (vat) could be reclaimed.

Also the capital value of goods in America from where he originates seem to be retained to a much higher degree then they do in the UK, particularly vehicles. In so much as they depreciate over a much longer period rather than the steep 40%-50% over the first 36 months we tend to see here in the UK.

So as a generalised statement it is still very relevant to modern business when it comes to machinery and assets but on the whole it's entirely irrelevant when applied to the private purchase or renting of cars in the UK.

 

[Deleted member 37751]

Whenever I've looked into Contract hire/leasing it seems to boil down to two things to make it worthwhile; you can't be picky about which car you go for and do not add any optional extras.

I was a rizla paper away from getting an E63 facelift on hire until I sat down and looked at it from a business point of view: the lease would have cost £18k over two years, but if I buy an £18k car for cash now it'd still be worth at least £10-12k in two years (yes I know the E63 would be brand new) and I'm not that bothered about having a brand new car that it'd cost me £175 a week before fuel, insurance, tax etc.

 

[def90cars]

My trade insurance specifically prohibits leased or financed vehicles.

Just for info.

 

[gIzzE]

The art of Contract Hire is simple, is the car you want to be in cheaper to hire than it is to buy?


That's all it really boils down to.

 

[Deleted member 6183]

SPX has it nailed.

It all depends on whether you are determined to only buy new or not.

If you are prepared to buy used then there are many more options.

 

[Red C220]

I like new, mainly as I can spec exactly what I want. That then becomes at odds with renting as the cost of options is punitive.

Therefore I buy new, but I tend to keep my cars a while.

 

[Yugguy]

My choice was fairly simple in that I wanted to get away from a monthly payment if possible. I certainly wasnt prepared to pay any more than 120-150 a month which wasn't going to get me anything worth having on a lease.

My C220 may be 8 years old but it is mint, looks great, has all the kit I want and is completely paid for. With the mileage I do and how I will maintain it I have a good chance of it still giving me a big part-ex figure when I eventually change it.

To be honest, with the interest rates as they are, and with us having been on a very low rate on a tracker, and now a very low rate long-term fixed I am quite enjoying over-paying the mortgage and watching years disappear off the term. Plus by the end of the fixed period we will be down to around 40%LTV and get the pick of the deals.

I get far more satisfaction watching the mortgage plummet than I would having a 66 plate on the drive.

 

[gIzzE]

I get far more satisfaction watching the mortgage plummet than I would having a 66 plate on the drive.

I must admit, as I get older so do I.


I think we have discussed this before, most of my friends who are in trades, their own bosses and deal in cash tend to buy outright. Most of my friends who are in PAYE jobs, get paid monthly, have all their bills monthly and have a set monthly income tend to lease/contract hire/pcp their cars.

Most of my friends down in the south east all tend to lease/contract hire/pcp their cars too, where as most of my mates from the south west and up north tend to buy their cars.
Not sure whether that is just because all their peers do so it becomes the norm, or whether it is those that have a £3k a month mortgage and a six figure income simply don't see £350 a month on a car as much at all, where as those with a £700 a month mortgage and only take home £30k a year see £350 a month as a silly monthly outgoing?


Do what suits you best and what you're happy with.

But if it is half the price to hire a car for the term you want to be in it rather than paying cash, you would be a bit silly not to do so.

 

[Yugguy]

Aye, what I should have said above was not "get away from monthly" but rather "avoid having."

I guess I'm lucky in that as well as a decent wage my company gives a bonus which is never less than 10% and usually 12/13%. It lets me put a good amount a year away so I can buy something decent outright.

As to houses I still find it odd to see people in tiny houses with 400 quid a month cars outside. But you pays yer money and you takes yer choice. I think the younger generation don't have that idea of owning your own property being important, like mine did (I'm 46)

 

[Deleted member 6183]

Aye, what I should have said above was not "get away from monthly" but rather "avoid having."

I guess I'm lucky in that as well as a decent wage my company gives a bonus which is never less than 10% and usually 12/13%. It lets me put a good amount a year away so I can buy something decent outright.

As to houses I still find it odd to see people in tiny houses with 400 quid a month cars outside. But you pays yer money and you takes yer choice. I think the younger generation don't have that idea of owning your own property being important, like mine did (I'm 46)

The house thing intrigues me also.

I've seen loads of people post photos of their cars on this forum and elsewhere and the car seems out of kilter with their home, as you say it's a matter of individual choice but I would invest in my home before my car.