New Car - leasing Vs buying - opinions please!

Velocitee

As you can tell by the title, I am looking into leasing as an alternative to buying a new car, the thing is as I'm posting this it's Sunday and (for some reasons best known to them) most car dealers are closed the days most people are off (i.e. the weekend!).

Anyway can anyone tell me what the procedure is with leasing? for instance if I was to take out a lease on a new car worth 25k how much could i expect to pay for the lease a year? I know a guy who gets a new car every two years, is this the case with most leases?

even if somebody could point me to an (irish) example of a leasing plan online, i'd be most grateful. Is leasing a viable alternative to buying?

Thanks
V

worded

Im interested in knowing as well.

I wonder when car dealers will start taking a Monday off and opening all day Sat like the motor bike trade do.


The one down side of a lease is you never own the car, but then again nothing depreciates like a car or boat they say.

Lawdie

Velocitee wrote:

I'm posting this it's Sunday and (for some reasons best known to them) most car dealers are closed the days most people are off (i.e. the weekend!).
V

Its a poor state when you appear to have conduct little mid week research, not even calling a dealership. Then demand Sunday opening. While I'm not involved with any dealership, I would think these people work hard enough evenings and Saturday that Sundays just taking the mick.

Do you work Sunday.

Most people looking at a major purchase will make a call, arrange a mid week, evening or Saturday morning appointment.

Velocitee wrote:

Anyway can anyone tell me what the procedure is with leasing? for instance if I was to take out a lease on a new car worth 25k how much could i expect to pay for the lease a year? I know a guy who gets a new car every two years, is this the case with most leases?
V

Check out the motor section of finance company website, AIB, BOI, Lombard, GE Money etc or look at contract hire companies like leaseplan. These will have information explaining this type of product.

New car 25k question. That question can't be answered. What is the make, mileage, finance provider, term, rate, service contract or buyback. The latter is something you'll never be informed on.

Regarding "the guy", it depends on his repayment and all the above. Most leases are two/three years in length.

Remember, you'll never own the vehicle at the final repayment. Its hand the keys back and go again. You are responsibly for excessive mileage, wear and tear, damage.

Lawdie

worded wrote:

Im interested in knowing as well.
The one down side of a lease is you never own the car, but then again nothing depreciates like a car or boat they say.

You also don't pay depreciation or take residual risks. Its about trade offs.

bazz26

Lawdie wrote:

You also don't pay depreciation or take residual risks. Its about trade offs.

Average depreciation costs are factored into the leasing payments so technically you are. Its just spread over the term of the lease rather than at the end when a car is sold on.

To the OP, Crosstownk is probably better at explaining the ins and outs of leasing, afaik he works in the business. Drop him a PM.

Velocitee

Lawdie wrote:

Its a poor state when you appear to have conduct little mid week research, not even calling a dealership. Then demand Sunday opening. While I'm not involved with any dealership, I would think these people work hard enough evenings and Saturday that Sundays just taking the mick.

Do you work Sunday.

I'm looking at the way I wrote that and I can see how I sounded like I was being snotty.

I just thought of leasing - hence the whole point of posting this, the problem is there are no dealers there to take a query on a sunday, so i wanted a bit of a heads up before i made enquiries. the car in question is a '08 1.6 focus witha few extras (alloys, bluetooth, keyless entry etc)doing about 12k a year possibly automatic.

and not to go off topic, I dont work sundays (starting last week) up until then I was working sundays for a good few years.

Lawdie

Your pay rentals in leasing. Bazz, Do you pay depreciation in a taxi fare?

Velocitee, Nope your weren't snotty, just a little innocent in your approach.

The details on your car won't matter. There are two types of leases, full payout and operating. The latter is also known as contract hire. The dealer decides what value the vehicle will be after x number of years with x number of mileage. Then factors a monthly payment with the invoice price and the buyback price. This is your monthly repayment.

Some dealership might not want to enter into this type of agreement with you. The residual buyback has to be accounted as a contingency liability for the company. Theres also the factor of damage to the vehicle.

Does you company have an arrangement with any provider?

crosstownk

If you're thinking of a personal lease then it's probably the most expensive option. Let's assume you want to lease a car for 3 years at 20,000km per annum and that the retail value of the car is €25k. First off, the leasing company will assume a residual value - i.e. what they believe the car will be worth at the end of the lease. Again, let's assume the car will be worth €10k after 3 years and 60,000km. What you will pay is the original cost (€25k) less the residual (€10k) spread over 36 months with interest added. For this example let's assume the interest is 8% p.a.

€25,000 - €10,000 = €15,000.
Now, €15,000 x 8% = €1,200 (interest per annum) as it's a 3 year lease this figure is multiplied by 3 and added to the €15,000.
So you will repay €18,600 or (€18,600/36) €516.67 per month (€119.23/week).

You will also have the option of a maintenance contract which is a monthly payment that generally covers servicing, tyres, road tax, breakdowns, 24hr roadside assistance, fuel card provisions and other items. You will obviously be responsible for any damage you cause to the car. What's on offer varies from one leasing company to another and the price is greatly dependent on the make and model, engine size and tyre size.

Essentially, the main difference is you pay for the cost of the car less the residual value. You can bet that any leasing company (dealer or otherwise) will play it safe with the residual and underestimate it to some extent. Leasing companies that play it too safe will be more expensive than those that take more of a risk. It does mean that you don't have to sell the car at the end and you can just take out a new lease on a new car, but you never own the car - it always remains the property of the leasing company. At the end of the lease you have no car, but most half decent leasing companies will give you the option of extending the lease.

The milage you expect to do over the period of the lease is important. If you exceed the originally estimated mileage you could end up paying as much as 10c per kilometer in excess charges.

Personally, I'd sooner buy a car outright or on finance for a single vehicle. Leasing is more suited to companies who want to be able to budget for the cost of the vehicle over the life of the lease.

If you do want to check into leasing then most main dealers will offer this option and it is worth noting that a main dealer will be a lot more competitive as it is easier for them to sell one of their own brands on the forecourt at the end of the lease. Most dedicated leasing companies will sell them off to the trade which means that the residual will be lower than that of a main dealer who will plan on selling the car retail from his forecourt.

In addition to main dealers, there are companies who specialise in leasing. Some won't entertain private or single car leases and some will. In Ireland the leasing companies that spring to mind are :

Avis Fleet Services
Johnson & Perrott Fleet
LeasePlan
Merrion Fleet

maidhc

Kearys in Cork do personal leasing afaik. They trade under the name of "Fleetplan" or something to that effect. They lease all makes and models, not just Toyotas or BMWs.

crosstownk

maidhc wrote:

Kearys in Cork do personal leasing afaik. They trade under the name of "Fleetplan" or something to that effect. They lease all makes and models, not just Toyotas or BMWs.

They do - but I'll bet they'll be a lot more competitive on 'own brand' leases. They would be well worth a try for Toyota, BMW/Mini and Lexus.

Lawdie

crosstownk wrote:

If you're thinking of a personal lease then it's probably the most expensive option. Let's assume you want to lease a car for 3 years at 20,000km per annum and that the retail value of the car is €25k. First off, the leasing company will assume a residual value - i.e. what they believe the car will be worth at the end of the lease. Again, let's assume the car will be worth €10k after 3 years and 60,000km. What you will pay is the original cost (€25k) less the residual (€10k) spread over 36 months with interest added. For this example let's assume the interest is 8% p.a.

€25,000 - €10,000 = €15,000.
Now, €15,000 x 8% = €1,200 (interest per annum) as it's a 3 year lease this figure is multiplied by 3 and added to the €15,000.
So you will repay €18,600 or (€18,600/36) €516.67 per month (€119.23/week).

Crosstownk has used a flat rate to work out the repayment. The math is missing one element. Static interest on the €10k. The above repayment is actually based on 3.5% flat rate or 6.59% IRR. Hes correct is saying your borrowing €25k.

Leasing is about budgeting as stated. If you want to pay 519.82 based on the above deal you'll own the car in 56 months or pay 767.27 and own it outright in three years. Your budget you call.

crosstownk

Lawdie wrote:

Leasing is about budgeting as stated. If you want to pay 519.82 based on the above deal you'll own the car in 56 months or pay 767.27 and own it outright in three years. Your budget you call.

It's a LEASE! You will NEVER own the car.

crosstownk

Lawdie wrote:

Hes correct is saying your borrowing €25k.

Incorrect. You are only borrowing the difference between the capital and the residual (15k in the example illustrated). The residual is the leasing company's risk.

LFCFan

What about the options plan with Ford. BMW have the same thing I think where it works like Crosstownk explained except at the end of the 2/3 year period you have the option to either continue with your payments until you've paid it all then the car is yours, you can trade the car in for a new one, hand it back or you can pay the balance and take ownership of the car. I would have thought this would be a better finance plan as you have the option of owning the car at some stage, whereas with leasing, you will never own the car????

R.O.R

While it sounds like a good idea I'd say it would be based on the retail price from Ford rather than a discounted price that you'd get from a leasing company. As Crosstownk said, any decent leasing company will give you the option to buy at the end of the lease, then you could finance that amount with a bank loan or car loan.

The product you are really looking for is a PCP (Personal Contract Purchase) - like a lease but with the option to buy at the end. Payments are based on what the car can be bought for, minus the optional buyout at the end, plus interest. Benefit of this is that you can either buy the car at the end or hand it back. The buyout figure at the end of the term will generally be less than the car is worth so it's beneficial if you buy out the car, but not if you hand it back.

Only one leasing company I know of do that and I'm not saying who as advertising is banned, but the people who brought you motorcard for cheap fuel can also look after this (www.benchmark.ie).

P.S. I'd be looking at at least 3 years on a lease otherwise the payments would be very high.

Kernel32

Lawdie wrote:

You also don't pay depreciation or take residual risks. Its about trade offs.

I don't understand this statement really.

The cost of a lease is the difference between the original value minus the estimated residual trade in value plus the cost of financing. Therefore a lease is the payment of the depreciation(the difference in values) of the vehicle plus paying finance charges. I'm not saying leasing is a bad thing because in some cases it can make sense but you are paying depreciation, that's pretty much all you are paying for.

Lawdie

Kernel32 wrote:

I don't understand this statement really.

The cost of a lease is the difference between the original value minus the estimated residual trade in value plus the cost of financing. Therefore a lease is the payment of the depreciation(the difference in values) of the vehicle plus paying finance charges. I'm not saying leasing is a bad thing because in some cases it can make sense but you are paying depreciation, that's pretty much all you are paying for.

Okay, heres a question. If the cars depreciation over the lease period is under or over estimated does the lease payment increase/decrease or stay fixed. This means the depreciation factor is not laden to the hirer once a payment is agreed.

I never stated that depreciation does not exist. But going back to an earlier question, do you consider a taxi fare as paying for the journey including depreciation? At the end of the journey you pay the agreed rate, exit the vehicle and walk away. Its a lease with a chauffeur!

maidhc

Lawdie wrote:

Okay, heres a question. If the cars depreciation over the lease period is under or over estimated does the lease payment increase/decrease or stay fixed.

The leasing company will leave enough of a margin of safety for themselves. It is just like buying a car and always getting a poor resale!

Lawdie

crosstownk wrote:

Incorrect. You are only borrowing the difference between the capital and the residual (15k in the example illustrated). The residual is the leasing company's risk.

Crosstownk, in my time I've done a few of these. So let me try to explain it as simple as possible.

A lease calculation is based on two factors (hence the description factoring payments), the invoice price and buyback. The payment is comprised of two elements.
1. Reducing balance, in your example the 15k
2. Static interest, the €10k

Ask yourself, if you loaned someone €25k now and they said I'll pay you for €15k over the next 36 months and then give you €10k. Would you give them the €10k as free money, of course not.

If your still finding this hard to understand. Think about putting €10k on deposit over 36 months. What would be your attitude if the bank handed you back €10k in three years with no interest, you would be most not pleased.

I hope you can understand this concept. If I need to explain it further let me know.

Lawdie

maidhc wrote:

The leasing company will leave enough of a margin of safety for themselves. It is just like buying a car and always getting a poor resale!

Mostly yes, thats there business. Whats the point in taking a risk without it. But, its very competitive and has its own margin pressures. Most larger deals are tendered and nobody has a crystal ball on residuals. Some models are safer but who knows what will happen over three years.

Many leasing companies have complex arrangements around the residuals with customers, for competitiveness. Some deals are done that lose on the residuals, with the hope of picking up other services.

On the other matter of poor resales, again in some cases yes. But theres a whole area most people don't understand and I'm not going to explain in type!

Lawdie

crosstownk wrote:

It's a LEASE! You will NEVER own the car.

Again crosstownk your showing a lack of understanding in this area. I was talking about budgeting payments when looking at the option of ownership based on your leasing payment. Maybe I'm not explaining this clearly, if so I apologise.

On the point of never owning the car. When you read the thread carefully, you'll notice I've already made that point for both full payout and operating lease.

eamon234

Bottom line is really this - the only advantage to a normal consumer of a personal contract lease is a low monthly outgoing - I worked for one of the above mentioned companies for a long time and it was the same story every time one of these agreements ended - the customer lost out.
There may be advantages in leasing for business (operating leases were mentioned earlier - these are rarely if ever an option for non-commercial customers) but definitely not for ordinary consumers - otherwise we'd all be doing it!

crosstownk

Lawdie wrote:

Crosstownk, in my time I've done a few of these.

As have I.

Lawdie wrote:

Ask yourself, if you loaned someone €25k now and they said I'll pay you for €15k over the next 36 months and then give you €10k. Would you give them the €10k as free money, of course not.

Essentially, you are correct. And it does boil down as you explain. But there is more than one way to skin a cat.

maidhc wrote:

The leasing company will leave enough of a margin of safety for themselves.

Exactly.

Lawdie wrote:

On the point of never owning the car. When you read the thread carefully, you'll notice I've already made that point for both full payout and operating lease.

Lawdie wrote:

If you want to pay 519.82 based on the above deal you'll own the car in 56 months or pay 767.27 and own it outright in three years.

This is more like a finance deal. With a lease you do not necessarily have the option to continue paying till you own the car. I've seen many examples where people have extended leases to the point where, had they opted for a straight finance deal, they would have owned the car years ago! These instances are rare, but by no means uncommon. As you correctly stated earlier, the payments are rentals - not repayments.

Lawdie

crosstownk wrote:

But there is more than one way to skin a cat.

Could you explain this further?