Key Post: New Car - Lease or buy?

This was originally posted by Bamboo

I plan to change my car early next year and have done some preliminery work on how it's worth as a trade-in.

It came as a monor shock to realise that my modest Ford Focus, driven conservatively with average mileage, no prangs etc, has depreciated by 10,000 Euro in just over two years. This is the equivalent of approximately 100 Euro a week.

It occurs that for 100 a week, I could lease a fairly nice motor (certainly nicer than a Focus) without any of the usuals concerns about its diminishing value. I'm aware however that certain terms of lease agreements can be somewhat restrictive (maximum allowed mileage, etc).
I'm also aware that as a PAYE worker, there wouldn't be any tax advantages.

Has anybody any experience (good, bad or indifferent) of how car leasing stacks up #as an option against outright ownership?

Re: New Car - Lease or buy?

Realistically the big chuck of that depreciation happened on the day you drove off the fore court. The actual weekly depreciation was unlikely to be €100.

Have you considered buying almost new?

-Rd

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Yeah, thought about that alright - There's a fair whack in the difference.

I've always bought new on the basis that I'm mechanically illiterate and this at least gives me the comfort of knowing that I should have surprise-free motoring for at least a couple of years (although I know it's also possible to buy a "lemon" from new).

It just occurred that for the same as it's costing me in depreciation, leasing might be a vaiable alternative. I'm just wondering what the "catch associated with leasing is - I know there must be one, this is Ireland after all.

Re: ..

I'm just wondering what the "catch associated with leasing is -I know there must be one, this is Ireland after all.

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I don't know if it's a catch but at the end of the lease period you don't own the car, you'd need to pay a lump sum to buy it, or start leasing a new one.

With a new car that you buy for say €25,000 after 5 years you'll possibly have paid €30,000 or more in loan repayments, but you'll own the car, so you can either drive it for a few more years without any more repayments (which greatly improves the maths you were doing earlier), or you can use the residual value as a trade in on something else.

Leasing over the same period you'd pay less but not have anything to show for it.

I bought new last time, but from now on I aim to buy a 1 or 2 year old car. I also aim to drive the current car until I've saved enough to buy the next one for cash.

Ford do a deal where you can have a new car every two years I think. You might like to look at that. I like the idea of getting to a position where I buy for cash, and drive them do death. But that's just me.

-Rd

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Thanks RD

I leaning towards a course of action similar to yours. Buying new in the current environment seems to make no economic sense. A one year old model with a couple of years warranty left would appear to be a more sensible option.

It says a lot for our progress that the most economically viable option for your two old car is to drive it into the ground. Still - better than the rust-ridden heaps we drove back in the 80s, I suppose.

Cheers

B

Re: ..

It says a lot for our progress that the most economically viable option for your two old car is to drive it into the ground.

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Yep. I'm not sure whether that's a bad thing though.
Cars are a lot more expensive now than a few years ago, but they're also more reliable, so overal they should be as good if not better value. But you lose that value if you trade in after two years.

I borrowed over 4 years for mine, and I hope it'll last about 8 years. Which would be the equivalent of a 1995-1996 car today. Assuming I keep saving the amount I currently pay in repayments I should be able to buy the next one for cash somewhere around 2009. (Knowing me I'll cave in and buy an Audi TT next year, idiot that I am, but at least there's good intentions!)

Good luck with the car hunting / or not as the case may be.

-Rd

Re: ..

Hi Bamboo

If I were in your shoes I would hold onto your 2 year old Focus for another few years at least. Changing cars every 2 years seems to be an awfully expensive option unless you're doing massive mileage.

Once a car is maintained reasonably well and serviced at the required intervals, you should have absolutely no problem for at least 5-6 years and probably long after that.

Of course motor sales people will try to tell you that a 2 year old car is "old" but at the end of the day all they are trying to do is to generate a sale at your expense.

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Tommy

I still labour under the traditional notion that the time to get rid of a car is at a point before it becmes too expensive to replace. Unfortunately this point now seems to occur immediately after you drive it away from the garage.

I think I may just drive it for another couple of years (I'm otherwise happy with it) and see what's available then.

RD

Go on, go for it - Buy the TT - getting into debt for the sake of a new focus is not worth it, but getting in over your head for the sake of a TT makes is far more romantic. You can always sell it again.

B

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There was an excellent report on buying cars on the Fool recently. If I can find it again I will post a link.

tedd

Re: New Car - Lease or buy?

Found it. The Motley Fool has a lot of recent UK based info on cars and depreciation. They say the average value of purchase price remaining is as follows:

New 100%
1 year 70%
2 years 55%
3 years 40%
4 years 30%
5 years 25%
6 years 20%
7 years 15%

There is some good [broken link removed] and [broken link removed].

This report is also very intersting reading when it comes to timing your car sale.

tedd

Re: New Car - Lease or buy?

What are the insurance implications on a leased car? Also, who is responsible for maintaining/servicing it? These would surely be a factor to consider.

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Tedd

Many thanks for the link -food for thought indeed.

FDM

My understanding is that most lease agreements oblige the driver to take out adequate insurance and to carry out regular maintenance. I'm not sure whether, or to what extent, this places an additional burden on the driver by comparison with outright ownership.

I realiase I am bumping an old thread, but what the hell...

On the servicing option, I know BMW include servicing costs on their leases (the ones I am looking at anyway). They also include the road tax, but insurance is your own responsability.

Buy cash if you can. Sell your own privately, again if you can.

Cars are very expensive bottom line.

Have a look at leaseplan.ie, they have a personal lease plan option (site seems to be down at present). Haven't used them - but can be interesting to see the figures for that dream car - and how much it will cost you.

Lease

Hi,
just joined this thread, as I am trying to extract myself from 4 year commercial car lease. Essentially all information here is correct. It makes total sense from tax point of view for self-employed people, but less so for PAYE. You can't 'claim' the vat, but about 50% of the 'net' cost of the monthly lease payments can be offset in your tax return.

The monthly cost depends on the value of the car, the annual mileage you agree and whether or not you include service/repairs in the monthly figure.

I took out a 4 year lease on a 159 Alfa Romeo Sportivo. Monthly fee is €585 (inc vat), based on 12k miles per annum. I did not take out 'service' as part of the agreement, as the first two years were covered by the manufacture's warranty.
The bank 'own' the car at the end of lease period, so there is no BIK involved.

I am currently looking for someone to 'take over' the remaining 19 months of my lease, as I am emigrating.
If not, I have to pay the bank for the remaining 19 payments and, of course, hand back the car.
You can, 'buy' the car from the bank at the end of the lease, if you wish.
If anyone knows of where I can advertise for someone to take over a lease, would be greatly appreciated.