To Lease or to Buy?

Energizeer

I just started a new job and want to get a car. I had been thinking of getting a 14k loan from the bank and buying a 02/03 bmw 3 series of some sort.
However, a friend has told me about how she has been driving around in a 07 car for the last year for less then what my repayments on the loan would be.
The way she justifies this is like this:
-After you have payed off your loan(5years) the 03 car will then be nearly 10 years old and you wouldn't get anything for it. So either way the money is gone.
-You may be saving money because of less service fees of a new car
-Instead of driving a 4/5 year old car you will have a new(ish) car

Do you think this is a good idea? I'm very tempted to go ahead with this. Also, with this 'credit crunch' business I very much doubt the bank would give any money at all...

Suggestions???

smartypants

out of curiousity do you know any leasing companies?

cabrwab

While leasing is a good idea in one way it is bad in another.

Usually the leasing companies have rules in the contract you sign, like you can only do certain miles a year and every mile over this will made pay a substantial fee.
Next they screw you if you have any damage done to the car, but this will happen anyway even if you buy one and need to fix it. Ive never had an experiace with a leasing company over here.

A car is never an investment you will never make any money on one!

-Chris-

Leasing isn't a bad idea at all. At it's simplest, you're only paying for the depreciation of the car rather than buying the car.
It takes all the risk out of buying a car too - all those people who've been stung by terrible trade-in values lately due to the recent price changes and the slow market would be swaggering around happy as larry if they had leased instead of bought. Leasing means the lease company takes all the risk on the second-hand value.

Because you're paying the depreciation, you have to pick a term and mileage. The lease company then hazards a guess what your car will be worth after that term and mileage and they plug that second hand value into their equation to come up with the monthly cost.
If you go over mileage, they'll charge you a pence-per-mile. It's not as punitive as some would have you believe, but it will sting a little as it's a lump sum at the end of the lease (which you haven't budgeted for). The leasing companies are right to chage this ppm though, as if your car has higher mileage than they thought, then the second hand value will be lower than they expected and they have to claim back the difference somehow.

Don't let this tempt you to write a lease based on much higher mileage than you think you'll do, you might think you're covering yourself but you're really just artificially raising your monthly payments for no reason. Try and be as accurate as possible with your mileage estimate.

Also ask if you can recalculate the lease half way through. If you write a lease for 3 years 60,000kms and after 1 year you've got 25,000kms, then you'd expect that you'll have 75,000kms at the end of the lease (and an overmileage charge).
If you can rewrite the lease at that stage, you'll merely increase your monthly repayments slightly rather than face the prospect of writing a cheque for a grand or two at the end of the lease.

Jack Bauer999

Forgive me if im being a bit slow here but i dont understand how leasing
a car is a great idea.

Take for example a regular new ford focus, worth 20,000 euro

On this leasing site theres an example of this,
http://www.autoleasing.ie/

If you were to buy this car outright it costs
622euro pm over 3 years with a bank loan

If you were to lease the car its
400euro pm over 3 years,

While at the end of the three years you may have paid 8,000 euro
less by leasing the car, you still have to give the car back,

Which means you have paid 14,400 for the last 3 years and are
left with no car.

Whereas if you have bought it outright, you have paid 22,392
over three years but still you now fully own a 3 year old car
worth possibly 12 or 13,000?

Fair enough you have to go and sell/trade in the car youself
whereas if you lease it then the company just take it back but
surely it makes more sense to buy outright,

Am i missing something?

Cyrus

i dont think so, but maybe you are overestimating the actual second hand value of the car? also maybe the lease includes free maintenance etc?

-Chris-

Jack Bauer999 wrote: »

Forgive me if im being a bit slow here but i dont understand how leasing
a car is a great idea.

Take for example a regular new ford focus, worth 20,000 euro

On this leasing site theres an example of this,
http://www.autoleasing.ie/

If you were to buy this car outright it costs
622euro pm over 3 years with a bank loan

If you were to lease the car its
400euro pm over 3 years,

While at the end of the three years you may have paid 8,000 euro
less by leasing the car, you still have to give the car back,

Which means you have paid 14,400 for the last 3 years and are
left with no car.

Whereas if you have bought it outright, you have paid 22,392
over three years but still you now fully own a 3 year old car
worth possibly 12 or 13,000?

Fair enough you have to go and sell/trade in the car youself
whereas if you lease it then the company just take it back but
surely it makes more sense to buy outright,

Am i missing something?

I don't think a €20k Focus will be worth 60%+ of its value after 3 years. Are you looking at the retail value of the car on forecourts or the actual value (trade value or trade-in allowance)?

The leasing quote also includes the cost of funding, which you haven't included in your calculations. If you borrow €20k from a bank over 3 years, how much will the cost of borrowing the money be?

ojewriej

What about Tax, Repairs, Service cost - would you have to pay it or the company youe lease it from?

And can a private person lease a car? I always thought it's just for business customers?

Cyrus

AudiChris wrote: »

I don't think a €20k Focus will be worth 60%+ of its value after 3 years. Are you looking at the retail value of the car on forecourts or the actual value (trade value or trade-in allowance)?

The leasing quote also includes the cost of funding, which you haven't included in your calculations. If you borrow €20k from a bank over 3 years, how much will the cost of borrowing the money be?

to be fair chris the interest cost is included at 8% or something like it, its the example taken from their own site

Jack Bauer999

AudiChris wrote: »

I don't think a €20k Focus will be worth 60%+ of its value after 3 years. Are you looking at the retail value of the car on forecourts or the actual value (trade value or trade-in allowance)?

The leasing quote also includes the cost of funding, which you haven't included in your calculations. If you borrow €20k from a bank over 3 years, how much will the cost of borrowing the money be?

As Cyrus said the cost of funding is included, i.e 2,392 euro
On the vrt cal the open market selling proce of a 3 year old focus
is 11,764.
Looking at the carzone the price seems to be anything from 10 to 15,000
for a 05 focus. So 12,000 seems to be about average.
But say even if you could only get 10,000 for it as a worst case
seanario. then it would still work out

leasing costs you 14,400
buying costs 12,000

Seems like a no-brainer unless the leasing company does pay
Tax, Repairs, Service cost etc..

-Chris-

Sorry, I missed the €2,392.

That's one to put to the leasing company I guess if you were looking for a lease. Just like buying a car, I'd expect the lease rate to be negotiable.

sk8board

would I be right to assume that leasing would be very popular in the case of premium cars?

I assume a lot of range rovers can be leased for 1200-1400 pm. Cheap if all you want is a 110k car but don't have the 110k

gezas

If you will lease car you will pay in the end a bigger price than if you will buy for cash. Otherwise you can save your cash for today if you will lease a car. If you will buy for cash you can get very good discount. It’s your choice.