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car leasing.....pros and cons

ProfilePosted byOptionsPost Date

ChrisofWessex

ChrisofWessex Report 28 Jan 2014 14:59

Hear a lot about this lately but know nothing. Anyone had experience of this? low mileage.

Thank you.

RolloTheRed

RolloTheRed Report 28 Jan 2014 15:51

If you are self employed or a business then car leasing makes a lot of sense 'cos you can deduct 100% of the lease cost from the profit/loss account and the VAT from VAT. No capital is tied up and any repairs/accident damage are paid by the leasor. The lease includes tax and often insurance. If you wish to take the vehicle/truck to the EU then sort that out before the lease starts. The lease period may be from 6 months to 3 years with no residual at the end of the lease. Obviously the usual taxation for the driver benefits apply.

For employed people a "lease" is something quite different. Typically a car is sold on "lease" for 2 or 3 years with quite attractive monthly payments. During the whole time the vehicle remains the property of the leasor. Nevertheless often running costs tax some or all repairs and insurance are down to the lessee. This tends to be less so with a new car.

The stinger is at the end of the lease with what is called the "residual". The lessee has to either buy the car at the residual price calculated at the outset of the lease or surrender the car and pay any difference between disposal price ( at auction ) and the residual to the lessor. Many people just roll one lease into another and thus avoid the residual fee. This type of deal has the upside of allowing one to drive a new or fairly new car without stumping up much money. The downside is that if circumstances change for the worse the residual can become a big problem. Mileage restrictions are very tight too with a typical limit being 10 000 miles p.a.

For my 2c I don't think personal leases add up unless (a) your annual mileage is lowish (b) you are 100% sure the end of lease residual won't be a problem and (c) the lease covers all maintenance costs inc repairs etc. - usually this means new or newish. The personal lease is also next to impossible to cancel after 14 days. Such leases have become a very popular way of financing cars. Taking on such a lease from a second hand car dealer is probably unwise.

For personal use I always pay cash - in my view it does not make sense to finance a rapidly depreciating asset when the loss cannot be set against tax. When I was living full time in Islington I just rented as and when needed there is no point in owning a car in central London.

A good bet is to buy an ex-demonstrator or < 1 year old car when the worst slice of the depreciation will already have been accounted for. The worst possible deal is to buy a 2nd hand car with 50 000 miles and up on the clock and the chance of major component failure ( e.g. clutch ) very high. Buying a cheapie for between £ 1500 and £ 3000 can work out quite well though avoid small cars in this price bracket. If anything big goes then just scrap it.

good luck



jax

jax Report 28 Jan 2014 16:07

We leased a couple of cars when we had a pub

Cost something like £200 a month (15 years ago) had to pay for own insurance and services but got road tax free.....think we had a 10k a year limit...so 30k over the 3 years.

ChrisofWessex

ChrisofWessex Report 28 Jan 2014 16:21

Our sytem is this - OH strolls into showroom - assistant rushes over - may I help you sir? Sir replies - I know exactly what I want, this is it and now I shall leave you to my financial dealer!!!

And OMG can I haggle! OH grins and just when think at long last they are going to clinch the deal - I ask for a full tank of fuel not a dribble and to write it down on their copy and mine.

We just want to find out all we can about leasing and see if it would be a viable option. It is a gamble as to how long OH will be driving. I am no longer able to.


jax

jax Report 28 Jan 2014 16:50

I am no longer able to drive but am entitled to a car on DLA if I wish obviously someone else would drive it.

I looked into it 5 years ago and weighed up the pros and cons

over the 3 years it would cost approx £7800 no insurance or tax ect to pay for.....but at the end of it I would have nothing......so paid the same sort of money buying a used car that suited my needs and still have it.....it has sailed through every MOT and only thing that went wrong was an electric window cost about £150 to put right

Paula+

Paula+ Report 28 Jan 2014 16:51

When I had my business I always had business lease cars and changed them every 2/3 years. I now have Personal Contract Plan. The payments vary depending on the size and make of the car. My Road tax is paid, plus maintenance for three years. You can pay the residule value at the end of the agreed period, or you can hand back the car, alternatively you can take out another PCP, and have another new car, they will take your old car as a deposit. I have never wanted to own a car long term, and enjoy having a new one every couple of years. I think the secret is that you have enough money to pay for the car outright if the need arises. I will be taking delivery of my new car next Month, with a full tank of petrol.

ChrisofWessex

ChrisofWessex Report 28 Jan 2014 22:22

Thank you all for your input. Haven't discussed it yet but I am leaning to the good old haggle - twenty years ago leasing would have been feasible - at this late stage in life - not so sure.

LadyScozz

LadyScozz Report 29 Jan 2014 04:58

When you stop leasing a car and buy one.... and need insurance..... the insurance companies put you on the lowest rating, because you have no insurance history.

We were out of Oz for many years, came back to find we were on the lowest rating for car insurance, it cost an arm and two legs!

Insurance company wouldn't take into account cars we had insured in the US & Germany.

:-(

Paula+

Paula+ Report 29 Jan 2014 10:12

Scozz I have to pay my own car insurance.

jax

jax Report 29 Jan 2014 13:55

Yes I had to pay for my own insurance as well, the only time it is included is when it is through the DLA (Disability living allowance)

They also examine the car for any dents and scratches and charge you when you hand the car back