Car Leasing or Buying

[sarahA]

We've been talking about replacing our car (6-7 yr VW Polo) with a VW Golf (upgrade from 3 to 5dr, bit extra space and better accelerator pedal) however a client of mine who deals in cars has said I could maybe get around £3.5k for my car and would be looking at around £7-8k for a 2-3 yr VW Golf. £4k+ is not really something we can afford in one lump sum and I'd rather not put it on finance or a card.

So another option I thought about was leasing a car but I don't know if this is a good idea or not.

I've taken a look on a car leasing site and for a new VW Golf (MK6) we could get more features and a brand new car for £181 + VAT a month for a 3 year contract. I'm guessing that as it's a new car we wouldn't have to MOT it for those 3 years (iirc), and we could either take out a maintenance contract too or cover those costs ourselves, which we would have to regardless although I'm guessing we'd probably pay out less on a newer car (well in theory!).

So for 3 years on a leased car we'd be paying around £7500 (for a £13k car on average) plus the cost of maintenance, compared to around the same for buying an older car, plus MOT and maintenance. I know we'd be able to sell the second hand car at the end of 3 years and get some cash back or keep it if we're happy, that's the only reason I can think of for still going for the buying route.

Anyway, sorry for rambling. Basically, anyone got any experience or thoughts on this? Would it be better to go for a leased car over paying out for one? You do get the option to buy the car after the contract, although I don't know how much that'd cost, at least enough to top it up to the full price, more I would imagine. I like the idea of being able to hand it back after 3 years and then look at a new car again. It's not something we'd be able to afford to have otherwise.

Any thoughts/advice welcome.

[Matt]

When I was looking for a new car, this was an option they gave to me. Get a new car, pay a monthly amount for three years, then replace the car, give it back at no cost or buy it.

I didnt decide to do it, I went for owning it at the end, I decided that an extra 2 years of paying for it to own it was okay, the monthly amounts were the same.

In hindsight, Im not sure I made the right choice, I mean the value of the car has already halved from new and services cost me £200 a year + so the benifit of owning a new car and no MOT will only be realised if something is majorly wrong and covered by the warranty, which it probably wont be...!

Plus Ill still be paying for it 2 years after the warranty has gone.

But thats just my mistakes! I shouldnt have brought the bloody thing anyway.

[Tony]

I opted out of our company scheme which is like a lease type thing but not exactly and went for an old banger. so far I think I'm around £1.5 - £2k up on the deal, and have actually started to be able to put some money into a savings account.

I did briefly look at external leasing, but the restricitons, penalties and the ongoing costs stopped me.

On a more personal level, I've had new cars and seen the state that the kids leave it in and decided that they can be transported around in a skip - hence the old omega

Next step is to get something a litttle newer with less mileage on it (160k) and probably diesel as asthmatics should be more careful where they breathe.

Looking to spend around £1500ish

[Shirker]

I did look at leasing but as soon as I told them I do about 40k miles a year the prices went through the roof as they get stuck with a car with the best part of 100k miles after 3 years. If you're reasonably low mileage then leasing does look attractive.

[sarahA]

In hindsight, Im not sure I made the right choice, I mean the value of the car has already halved from new and services cost me £200 a year + so the benifit of owning a new car and no MOT will only be realised if something is majorly wrong and covered by the warranty, which it probably wont be...!

That's my thought. I don't know what I expected but I didn't expect to hear my car had lost about half it's value in 2.5 years.

I did look at leasing but as soon as I told them I do about 40k miles a year the prices went through the roof as they get stuck with a car with the best part of 100k miles after 3 years. If you're reasonably low mileage then leasing does look attractive.

Working from home we do fairly low mileage. I bought the car in Nov 06 with 14k on the clock, it's now just hit 33k in just over 2.5yrs so I reckon 7k a year on average, no more than 10k which is the lowest they offer.

I know the other option is to look at the price of a cheaper style car which I'll check on tonight. Although I love my VW and would much rather stick with the same make.

My thought is that if we can sell my car for £3-3.5k then we've got half a 3 year contract cost already, so we'd only be paying around £100 a month anyway. Then in 3 years we can take the time to sort everything else out (house/mortgage mainly) and then that'll give us a bigger new car with presumably less hassle (I could be wrong there) and then in 3 years time we can see how finances are and maybe buy the car off them or possibly look at a new car but buy it outright.

Does leasing a car go down on your credit check? My main concern/thought is that I could get another car and put it on finance or a card again, but it'll take us a couple of years to pay it. If we want to try to get a mortgage in a couple of years it'll look better if we don't have any debt to our names. If leasing a car can prevent that then it's a more attractive solution. Obviously I don't know if it does or not.

[Matt]

I think it does go on your credit history, as the credit Im on is  a hire purchase, so technically Im hiring it off them untill I pay it off, and it most def is on my credit history, noted as a HP agreement though, and not standard credit.

To give you an idea on depreciation - my Seat Ibiza 5dr limited edition (so its got a few extras) was £10k new september 07

With interest at 10% pa Im paying £12k in total over 5 yrs @ £211 a month (I didnt pay a deposit as I had a cheque instead to pay off another loan)

In feb this year, so at a year and half in - a Seat dealership offered me £5,000 for it. Which wasnt enough to get me out of the HP agreement, and that was with 16k on the clock, one owner and still in warranty.

On the plus side next feb, 2 and a half years in I could just hand it back at no cost or benifit any month after that. I wont, but nice to know if I needed to get out, I could.

In hindsight, Im not sure I made the right choice, I mean the value of the car has already halved from new and services cost me £200 a year + so the benifit of owning a new car and no MOT will only be realised if something is majorly wrong and covered by the warranty, which it probably wont be...!

That's my thought. I don't know what I expected but I didn't expect to hear my car had lost about half it's value in 2.5 years.

I did look at leasing but as soon as I told them I do about 40k miles a year the prices went through the roof as they get stuck with a car with the best part of 100k miles after 3 years. If you're reasonably low mileage then leasing does look attractive.

Working from home we do fairly low mileage. I bought the car in Nov 06 with 14k on the clock, it's now just hit 33k in just over 2.5yrs so I reckon 7k a year on average, no more than 10k which is the lowest they offer.

I know the other option is to look at the price of a cheaper style car which I'll check on tonight. Although I love my VW and would much rather stick with the same make.

My thought is that if we can sell my car for £3-3.5k then we've got half a 3 year contract cost already, so we'd only be paying around £100 a month anyway. Then in 3 years we can take the time to sort everything else out (house/mortgage mainly) and then that'll give us a bigger new car with presumably less hassle (I could be wrong there) and then in 3 years time we can see how finances are and maybe buy the car off them or possibly look at a new car but buy it outright.

Does leasing a car go down on your credit check? My main concern/thought is that I could get another car and put it on finance or a card again, but it'll take us a couple of years to pay it. If we want to try to get a mortgage in a couple of years it'll look better if we don't have any debt to our names. If leasing a car can prevent that then it's a more attractive solution. Obviously I don't know if it does or not.

[Ben]

The other 'problem' at the moment is the second hand car market is doing well - small cars are going for far above what they would over a year ago as no-one is buying new cars.

[sarahA]

I think it does go on your credit history, as the credit Im on is  a hire purchase, so technically Im hiring it off them untill I pay it off, and it most def is on my credit history, noted as a HP agreement though, and not standard credit.

Yeah hire purchase will, as effectively they've put you on finance to pay off the car although it half sounds like leasing too if you can hand it back. Whereas pure leasing is a bit like having a mobile phone contract or house rental agreement. You agree a fixed period and pay each month. Although as I say, I don't know for sure if leasing goes down on your credit history or not. I'm sure they'd check your credit of course.

You depreciation certainly puts a few things into perspective. Then again the dealership offering you £5k is obviously a lower figure than if you tried to sell it privately. I'd have thought you'd at least get £6-6.5k for it. Still, it also removes the hassle of selling a car. It took 9 months to get my Smart sold and even then I took £900 under the price it was worth. I got less for it than I'd paid to fix everything just a month before I put it up for sale.

Food for thought. Cheers all

[yawner]

I opted out of our company scheme which is like a lease type thing but not exactly and went for an old banger. so far I think I'm around £1.5 - £2k up on the deal, and have actually started to be able to put some money into a savings account.

I was wondering how the experiment was going Temps!  No horror/breakdown tales yet? 

[Tony]

I opted out of our company scheme which is like a lease type thing but not exactly and went for an old banger. so far I think I'm around £1.5 - £2k up on the deal, and have actually started to be able to put some money into a savings account.

I was wondering how the experiment was going Temps!  No horror/breakdown tales yet? 

Had a couple of breakdowns - the fan belt tensioner siezed and the engine boiled, but no real damage had it done a work, then a sensor died on the engine, managed to get it home miraculously - it cut out as I pulled out on a busy roundabout, but I managed to get it off the roundabout using the starter motor in gear, left it for ten minutes, then got it home - bloke over the road is a mechanic, so he towed it to his garage and fixed it - he mentioned that the axle is making a noise, which I knew about.

Had a couple of new tyres as well - apparently the track rods are seized and they can't adjust them so it scrubs the nearside front.

Cost me about £500 in total over what is nearly a year - thats including the MOT which it sailed through with no advisories or anything (much to my disbelief) still goes well, and it being a 2.5l v6 it still gets some hammer and not much can keep up with it.

So, including tax and insurance, it's cost me around £1400 for a year (including buying the darn thing) with two breakdowns whereas the focus I had before from the company, cost me around £4k with the income tax added on and was in the garage a few times for recalls/faults etc. so even taking into account the difference between a 1.6 diesel and a 2.5 petrol in terms of fuel economy, I'm still quids in.

[robbie]

My sister and brother-in-law both do it, and it seems well worth it. Can't remember the details. but we went through all the figures recently, and it all worked out. The bargains are to be had on the higher spec cars, as there are simply fields of them unsold. Monthly fee for everything but petrol, insurance and tyres. All servicing included, and of course its under warranty.

[sarahA]

This is my thought, for a new decent car leasing looks to work out cheaper as you'd probably spend out as just as much possibly less than if you bought one and sold it after the same period of time, plus the hassle of selling added on.

Compared to buying a second hand car (in the same range) then I think if you get a reliable second hand car then that would be cheaper. My car was 4 yrs old when I got it at just over £6k. First service was £350, MOT was £100+ as I had to have 2 new tyres, next service was around £300 again to fix things the previous service didn't plus 2 more tyres, MOT was again around £100 as something needed fixing. So not quite £500 a year at present. Insurance would come into either method so I'm not counting that!

It's due another service this month, then MOT at Christmas. So that means over 3 years the car plus maintenance comes to around £7500, and I may get £3-3.5k for it at present. If I wait until November when I've had it 3 years then probably £3k.

Robbie - don't suppose you could find out which leasing company your sister uses?

[robbie]

There are two other factors apart from money:

1. peace of mind -  I dread MOT/service time when I drop it off and wait for that call. Also, my car is making an odd noise, I know nob all about cars, so it needs checking out, and I worry that it could be something bad.

2. you get a nice new car every few years

I don't do it, but am seriously considering it for next year when I finally go and get myself a proper job

Sis is away for away few weeks I'm afraid, so can't help there at the mo.

[sarahA]

1. peace of mind -  I dread MOT/service time when I drop it off and wait for that call. Also, my car is making an odd noise, I know nob all about cars, so it needs checking out, and I worry that it could be something bad.

I know that feeling. Before I sold my Smart I took it for MOT and had to have the suspension replaced plus new tyres. Cost around £1600 thanks to only being able to take it to Mercedes. The car was great but so expensive for maintenance.

I'm seriously considering it as I fancy a nice new car

[Matt]

Ive been thinking thanks to this thread, about handing mine back and just taking a hire agreement as well. Im already paying £200 a month, the only thing is approx cost of hiring a similar car, as this way I wont have ever finished paying for a car!

[Haze]

Wife due to start a new job, so as we live in the middle of nowhere, we'll need another car. I quite fancy investigating the leasing option, wife wants to try to get a runaround for £1500/£2k... any thoughts, how far has anyone got in the leasing comparison?

Cheers

[robwhizz]

We've recently been looking at leasing our company cars instead of buying. We ruled it out in the end because we do a lot of miles and that pushes the lease right up.

If you do average or low mileage, then it seems to work out around the same as buying. You are some really good deals about too like free tyres and brakes, which essentially give you free motoring after you've paid the lease and fuel.

Depreciation of motors, repairs, servicing, tyres and brakes generally seems to work out about the same cost as a lease (depending on model of course).

My other reservation with leasing is damage. You've really got to look after the car. You'll end up forking out a lot money at hand back time if there's any damage.

[sarahA]

We're possibly going to look at buying a new car now. My Mum's car is over 10 yrs old and as they're both retired now they don't need it so I'm looking at how much I can get back on scrappage with it plus get my own one sold. VW could potentially offer £3.5-4k off a new Golf according to their site, plus then if i can get £3-3.5k on mine then it'll mean not the cost of the new car is not much more than what we'd pay on a 3 yr lease, and we'd own it completely.

It's quite frustrating though that we'll potentially get the same or more for a 12yr old fiesta as we will for a low mileage perfectly fine VW Polo!

[sarahA]

Wife due to start a new job, so as we live in the middle of nowhere, we'll need another car. I quite fancy investigating the leasing option, wife wants to try to get a runaround for £1500/£2k... any thoughts, how far has anyone got in the leasing comparison?

Look at http://www.nationwidevehiclecontracts.co.uk/ however you're looking at a minimum of probably £3-4k over 3 years.

[Chris H]

Ling who runs the lingscars site is always going on about how on a 3 year deal they pay the tax and she recommends not getting a maintenance agreement as everything should be covered by the warranty / servicing agreements. Worth having a look at the site as there's a lot of info on there

Downside would be the additional costs if mileage went beyond what was originally agreed and the hassle of keeping it clean and tidy for when it has to be returned.

[Haze]

mmm I think our (well the wife's) intended budget is probably a bit lower than required to seriously consider leasing..... we were after a second car rather than a main car.... But Ling's site does look like a good source.

[sarahA]

For the Golf I was checking out it would cost me £200 a month roughly, so around £7500 a year. I know a new car would be under warranty but that doesn't cover wear and tear so tyres, brake pads/discs, oil change etc. would all still need paying for which I think a maintenance contract can often cover.

I think for a run around a second hand car would probably be the better idea.

[Mr Anderson]

so around £7500 a year

She did mean 3 years for that

[net-curtains]

Our 3 year old Golf was about 6k as we went for an ex-mobility model. That means it's not top spec, but they're usually very low mileage and ours was in very good nick.

VW Golf's are very reliable, built like tanks, and I really doubt that you'd have any repairs at all on it for at least the first 75k (we haven't), unless it'd been thrashed or was an ex sales reps car.

VW's also hold their value a lot better than other makes so the deprication wouldn't be so steep.

Personally if you can afford it I'd recommend buying a second hand model.

[sarahA]

Yeah mine is 7 yrs old, 34k on the clock and besides standard wear and tear I've had just two minor issues although one just had bad timing (ie. 2 days before we moved!). But it's one reason I'm thinking to get a new VW (with potentially £3-4k discount that's almost 25% off) and then keep it for a good 7-10 years possibly.

so around £7500 a year

She did mean 3 years for that

Ahem, I was tired

[net-curtains]

But it's one reason I'm thinking to get a new VW (with potentially £3-4k discount that's almost 25% off) and then keep it for a good 7-10 years possibly.

In my experience when things look too good to be true that's usually the case. It's difficult to say without seeing the actual contract though as they vary wildly.

I wouldn't go by the showroom price anyway, with new car sales so low at the mo you're bound to get a good deal. I bet you could get 3-4k off with a bit of haggling.

[sarahA]

In my experience when things look too good to be true that's usually the case. It's difficult to say without seeing the actual contract though as they vary wildly.

Well even £2k which is the min as far as I'm aware will be a nice discount

I wouldn't go by the showroom price anyway, with new car sales so low at the mo you're bound to get a good deal. I bet you could get 3-4k off with a bit of haggling.

I intend to get as many free extras as I can. Knowing I'm in a position to buy and they want to sell, yeah I intend to get a good deal or if nothing else, a good deal on a part-exchange.

[yawner]

Here's what my pal does - in fact he swears by it.

Arranges finance on car, tries to get smallest deposit possible, smallest payments possible, and biggest final 'balloon' payment. He then proceeds with payments until he has paid off 50% of the TOTAL (ie including interest) cost of the car. At that point he contacts the finance company and says he wants to voluntarily terminate the agreement. All perfectly legal and within the terms of car financing. Check your finance agreement, it will show the 50% figure and explain that you may terminate the agreement. After that its a case of returning the car to an agreed place (usually an auction house).

My pal thinks he saves money by this, I'm not convinced, and it makes my head hurt to weigh up the pros and cons. Opinions?