Lease Deals

[Mudster]

But assuming you have a couple of these Saabs, after 3 years you're £26k down with absolutely nothing to show for it.

GM are in the poo because Americans all relied on cheap borrowed money to buy things, take away the cheap borrowed money and the economy nosedives.

Yup, and if we'd bought them we'd be £36,000 down and have "Nothing to show for it" apart from the bother of having to dispose of two vehicles.

Or I could save the all the money and get a bicycle and a lose a bit of weight to show for it....


If you want a conversation about the merits of leasing vs buying then compare apples with apples....

Saying I could have two used ones for the cost of one new one is as arbitary as saying I could have a one month family holiday in Orlando first class for the cost of a new one.

If I wanted to buy a used car I'd go an write a cheque for it, I'd then go an continuously write cheques for it when it breaks down and I need rental vehicles.

I cover 25,000 miles a year, need a reliable car that presents a tidy image of my business without being ostentatious. I need that vehicle to be VAT deductible and I want it off my balance sheet as a depreciating asset.

Even my accountant couldn't believe the deal I got on this Saab, it's like GM giving me £6,000 off and 0% finance.

 

[nick mercedes]

Yup, and if we'd bought them we'd be £36,000 down and have "Nothing to show for it" apart from the bother of having to dispose of two vehicles.

You'd have 2 nice cars to show for it that you'd own outright.

 

[Mudster]

You'd have 2 nice cars to show for it that you'd own outright.

Ok, lets spell this out you're struggling to grasp the idea of this....

I buy two Saabs at £26,000 = £52,000 - I own the cars, they give me three years (probably two) motoring then start falling to bits.

That's cost me £52,000 and I "Own" two cars worth around £15,000 with the repair bills so I need to sell these and buy new ones. net cost £37,000 after allowing for asset value


I lease two saabs for three years, this costs 2 x £13,000 = £26,000 I "Own" nothing at the end and have no liabilities and no repair costs.

net cost £26,000 I then lease two new ones.

Explain to me how I'm better off buying when I need to replace my cars every 3 years?

 

[Howard]

Did you get out of the wrong side of the bed this morning ?

 

[nick mercedes]

Ok, lets spell this out you're struggling to grasp the idea of this....

net cost £26,000 I then lease two new ones.

Explain to me how I'm better off buying when I need to replace my cars every 3 years?

That only stands up if the lifespan of a car is 3 years, which clearly it isn't.

It's the idea that blowing £26k in 3 years and having nothing to show for it and it being a jolly good idea thing that I'm struggling to grasp...

 

[Mudster]

Did you get out of the wrong side of the bed this morning ?

It's frustrating with these lease conversations, that someone always thrown in "you don't own it at the end" well of course you don't, I'm also not paying £11,000 for something worth £5,000.

If I wanted to "Own" a £5000 car, I'd go and write a cheque for one and cut out the depreciation from the word go thanks...I don't I want a new car for the reasons above and I'm interested in the cheapest way to provide that new car.....

Leasing actually costs less if I intend to replace with new every 2-3 years.

If buying a car was more financially viable why does almost every single business lease instead?

 

[nick mercedes]

If buying a car was more financially viable why does almost every single business lease instead?

Because it's supposedly tax efficient and they don't actually have the money to buy the assets in question.

But then a lease can become a millstone as is a liability that's very hard to escape from should the business environment change.

I'm an asset man me, even if my assets aren't especially new and exciting, but each to their own.

 

[Mudster]

That only stands up if the lifespan of a car is 3 years, which clearly it isn't.

It's the idea that blowing £26k in 3 years and having nothing to show for it and it being a jolly good idea thing that I'm struggling to grasp...

I've had three years trouble free motoring in two new vehicles and absolutely no repair costs..that's a long way from "Nothing to show for it"

I'm prepared to pay for a new vehicle, to me it's just a piece of equipment like a delivery vehicle or a fork lift truck.

Any downtime on that vehicle could cost immeasurable amounts of money in lost business, which is why I value reliability over residual value.

So when I buy that new vehicle all I'm interest in is the lowest cost of ownership over a three your period.

Your argument is effectively "Why would you buy a new car at all - you can buy the same car used with 60,000 miles on it for 20% of the price"...well of course I can, but that's no good to me.

 

[nick mercedes]

Your argument is effectively "Why would you buy a new car at all - you can buy the same car used with 60,000 miles on it for 20% of the price"...well of course I can, but that's no good to me.

I can see why some people want new cars, the warrenty, the new car smell, picking the best spec, looking good on the drive and all that sort of thing.

But if new is important why not get a loan or finance of some sort, at least then the money you've laid out is not wasted and you have something to show for all those monthly payments?

 

[Mudster]

Because it's supposedly tax efficient and they don't actually have the money to buy the assets in question.

But then a lease can become a millstone as is a liability that's very hard to escape from should the business environment change.

I'm an asset man me, even if my assets aren't especially new and exciting, but each to their own.

A vehicle is not an asset it is a depreciating cost, apart from certain classics that is. As pointed out by the numerous "I can't believe how low the prices are" threads.

I don't want capital tied up in depreciating assets when I can buy stock with that money and generate more money with it.

However back to the original point, my cars cost less to lease over a three year period than if I'd bought them and chose to sell them, by some £11,000. That's a sensible choice for me if I'm going to use two new vehicles.

 

[nick mercedes]

A vehicle is not an asset it is a depreciating cost, apart from certain classics that is. As pointed out by the numerous "I can't believe how low the prices are" threads.

I don't want capital tied up in depreciating assets when I can buy stock with that money and generate more money with it.

Aren't vehicles fixed assets?

I agree that they depreciate, but then so does stock....

 

[whizzkid11]

Mine is a prime example of why General Motors are in so munch poo they are sudsidising my car, thanks very much.

So we can blame you if GM go down...

 

[Mudster]

I can see why some people want new cars, the warrenty, the new car smell, picking the best spec, looking good on the drive and all that sort of thing.

But if new is important why not get a loan or finance of some sort, at least then the money you've laid out is not wasted and you have something to show for all those monthly payments?

Simple...

Lease....

I pay £13,000 to "Use" one car for three years, then hand it back

Buy....

I pay £26,000 to "Buy" the car, use it for three years then sell it for £7,500 - cost = £18,500

How do I have More to show for it by buying? I'd have paid £26,000 for an "asset" now worth £7,500 - but Ive had three years use

Leasing I've paid £13,000 to use it for three years and hand it back then start again.

When Leasing I only finance the depreciation less a subsidy from GM.

When buying I finance the depreciation and capital value of the vehicle without any subsidy.

Buying new in full or on HP is only viable if you intend to keep the vehicle more than two or three years and run it into the ground then start again.
Otherwise leasing is simply cheaper.

 

[nick mercedes]

Simple...

Lease....

I pay £13,000 to "Use" one car for three years, then hand it back

Buy....

I pay £26,000 to "Buy" the car, use it for three years then sell it for £7,500 - cost = £18,500

The solution to all this I suppose is not to discard cars every 3 years.

I still think £26k is a lot of money to blow in 3 years, but as I said each to their own...

 

[Mudster]

Aren't vehicles fixed assets?

I agree that they depreciate, but then so does stock....

It depends how it's financed/bought.

A lease vehicle is simply a cost, it's not even listed as an asset.

How does your stock depreciate? I buy mine in at a fixed price and sell it at a fixed price.....usually contracted before I buy it.

 

[nick mercedes]

How does your stock depreciate?

Surely all stock depriciates, other than bars of gold and faberge eggs?

 

[Mudster]

The solution to all this I suppose is not to discard cars every 3 years.

I still think £26k is a lot of money to blow in 3 years, but as I said each to their own...

So the conclusion we've arrived at is this...

If you're going to change a vehicle every three years, leasing may actually be cheaper if you get a good deal. By quite some margin.

If you're going to keep the car indefinitely. Lease for three years, hand it back and buy a three year old car that's identical.

Buying new in full, outright is probably the most expensive option if you intend to keep the car indefinitely. By quite some margin, this has worsened recently with the appalling residual values.

Take a look at the big manufactures refinancing costs annually, it's that that is crippling their businesses, they are swallowing so much on lease deals and balloon payments it's frightening.

 

[Mudster]

Surely all stock depriciates, other than bars of gold and faberge eggs?

I guess it depends how critical it's shelf life is, food will depreciate more than coal for instance.

Some of my stock has recently appreciated due to lack of availability from other suppliers.

Stock is simply an input and output unless it has a defined lifespan.

 

[gIzzE]

If you play the leasing game it is far cheaper than buying, even buying a year old, or even two year old car, but you have to play the game and buy the car the manufacturer is throwing money at.


Example BMW 730d and Mercedes S320cdi, both these cars were £55k when the companies were offering the lease deals at £499 a month.
They wanted to get more of the big cars on teh road, so they threw money at them.


Now, a £55k S320cdi and 730d actually costs around £38k for Mercedes to produce.
They also knew (well thought as they have got their fingers burnt badly becuase of the down turn) that they would still be able to sell them for £27,999 at 3 years with 30k miles on them.

So they only needed to fund £10k.

Now the offer was 3 x 36, so £1500 down and 36 months at £499, total cost to the customer of £19500.

Now if you were to buy that car, at £55k less 10% discount so £50k. You would be offered a trade in of £25k for it. So even if you paid cash, so no interest charges it would cost you £25k.
Now if you were to finance that at 8% it would be £947 amonth, a cost to the customer of £34,000 over the 3 years.


So the manufacturer makes no money??

Well no, they make nothing on the car, but they make it through the finance.

£499 a month with £1500 deposit means they have still made £14,000 through funding the car over the 3 years.



This is basically what Ford have been doing for the last few years, they have been a finance company, the cars are simply a tool to help sell the finance, problem is with interest on cars at 0.9% at the moment that no longer works.



So leasing can be the sesnible way to go if you want a car that is less than a couple of years old, and can be a no brainer if buying brand new.


It isn't black and white.

 

[nick mercedes]

So the conclusion we've arrived at is this...

If you're going to change a vehicle every three years, leasing may actually be cheaper if you get a good deal. By quite some margin.

I'm not convinced.

I'm after a Vivaro at the moment.

Special lease deal:

http://www.vanleasingspecialoffers.co.uk/van-leasing-special-offers/Vauxhall/Vivaro/8359092/

£6584 cost after 3 years, no van to show for it and every ding and scratch is a big problem.

Outright:

http://www.perrys.co.uk/used-search...m_price_F=0&to_price_F=9999999&vehicle_type=V

£9970 mine forever (in fact I fount an 08 08 del miles for £8778 but I can find it right now)

So leasing costs £3386 less than buying, but I get to keep the van.