Car Leasing

[NX01]

Hi

 

As the title suggests I am looking for advice on car leasing etc.  Up until now I have never had young cars, currently got a 1 year old Superb which is excellent and despite problems with Skoda at the build process etc I kinda enjoyed the "new car experience".  Currently the car is in warranty for 5 years and has GAP insurance for 5 years so I am well protected going forward, but my mind keeps wandering to its eventual replacement.

 

My current thinking which I know all about is in 3.5 years time when it is 4.5 years old driving into the dealer and part exchanging it for a new car and once again paying cash (current car was a living inheritance) either through savings from now forward for example or from a loan from the bank.  Both areas I understand well.

 

Leasing I just don't full understand and it looks so expensive, my current car on lease according to the Skoda UK website would be £397.66 per month (L&K 220tsi) (£5000 deposit, 48 months, 15,000 miles).  Now I know that my car will have some value in it in 3.5 years time and that is an unknown.  Does the dealer offer a trade-in price which gets used as the deposit?  If so, what happens if it is over the maximum allowed for a deposit?  

 

I would ask a dealer but the chances of getting a straight answer are not great and then it would just be bombarded with follow ups or lack of interest if they know it is just an explanation for years to come.

 

Thanks for advice

 

Paul

[daveo138]

So, you would be paying £25000 over 4 years, plus any excess mileage?  Is that 15000 miles per year, or total?

 

Is it PCP or PCH?

[NX01]

Looking on the Skoda website it says PCP and yes it is 15,000 miles per year.

[Sagalout]

PCP means a personal contract purchase. Just like good old fashioned hire purchase except that you dont have to pay for the whole car unless you want to; you only pay for the bit between the buying price and the guaranteed future value plus the interest. If at the end of the contract the trade in is worth more than the gfv then that money is yours to do with as you wish. If the trade in is less then you just give it back and start again. You can finish the contract early at any time and you will be only have to pay interest for the time you have had the contract. If you put down a big enough deposit then you will always be ahead of the game within 9 months. I guess it gives a lot of freedom without having to stump up large capital sums every few years. Remember on the skoda finance quote that it uses retail prices. You can, at the moment, get at least 15% discount on a Superb with a PCP so you need to factor that in when making any comparison. Rough guess that would reduce your payments by about £60 per month.

 

If I want a new Superb 220 every 4 years (to use your plan) and I buy new for cash with the current 15% discount that's about £27500. In 4 years it will have a trade in of about £7.5K (according to fleet news) so I will have to find another £20000 to get back to a new car. So when looking at PCP or PCH deals I have to start from there. £20000 / 48 months equals £416 per month equivalent and I have to have the £20000 to hand at that point.

Whereas if I only have to find £5000 for the next 4 years plus my payments of £330x48 that equals £20840 but my capital reserves have only been depleted by £5K every four years

You can do the rest of the maths from there. As with all these things you can make figures do what you want and I am not saying this is the right or only way to do this. They are the figures that changed my approach to buying cars.

 

I have now bought several cars on PCP and in all cases I have had some equity at the end, even with a merc who are notorious for having high gfv values in order to keep customers locked into Merc.

 

Hope this helps a bit.

[IJWS15]

I have an Octavia on personal lease, due to go back in 2 weeks and am replacing with a Superb on lease (saw the car Friday but have to wait until 21st.)

 

It gives certainty over costs and no concerns over trade in value or residual.  You do need a good estmate of your mileage.

 

All I do is insure it and put fuel in.

[smo_1981]

There are some great lease deals around currently, of course you aren't even looking for 3.5 years so its kind of irrelevant. 

 

With a lease you never own it, generally the up front payment is lower than on a PCP but of course you simply hand it back at the end and start again so no residual value to put towards your next vehicle.

 

I've got a lease on a Superb Estate Sportline, it was £2000 down and then £190 a month for 23 months (+vat - its a business lease), the equivalent PCP would be nearly 3 times the cost over the same period.

[tigermad]

9 hours ago, smo_1981 said:

There are some great lease deals around currently, of course you aren't even looking for 3.5 years so its kind of irrelevant. 

 

With a lease you never own it, generally the up front payment is lower than on a PCP but of course you simply hand it back at the end and start again so no residual value to put towards your next vehicle.

 

I've got a lease on a Superb Estate Sportline, it was £2000 down and then £190 a month for 23 months (+vat - its a business lease), the equivalent PCP would be nearly 3 times the cost over the same period.

That must be low mileage for those figures?

[IJWS15]

2 hours ago, tigermad said:

That must be low mileage for those figures?

+1,

 

The Octavia is £363 for 25k a year, when i got it it was about £220 inc VAT for 10k but then I changed jobs.  Cheaper as a personal lease and claiming 45p than the business leasing it and providing it as a company car and paying NI on it.

 

Excess miles on the Octavia, and there will be about 1500,  are a little under 8p each.

[smo_1981]

2 hours ago, tigermad said:

That must be low mileage for those figures?

 

10K a year, excess mileage 6.9p/mile.

 

I could run it as either a business lease through my company or a personal lease - just pay it from either the business or my personal bank account, obviously the latter would have VAT which couldn't be reclaimed.

[Whaty]

I've always bought my cars, both used and new, and typically that involved taking out some kind of loan. Given that I try to change my car every 3 years, I've just about paid off one loan when I enter into another, so I'm effectively paying for my car monthly anyway. Then you have the problem of disposal, either you trade it in or try to sell it privately...

 

I came across a PCH scheme being run by my local dealer, by chance it was on the very car/spec I wanted. It's a 24 month deal adjusted for mileage and one or two minor extras. The 'initial rental' is far less than I would normally put down as a deposit and I have 23 monthly payments of a little over £200. If I've got my sums right, my total outlay over the 2 years is less than the depreciation the car will suffer over that same period.

 

It's not my car, I'll never 'own' it and at the end of the contract I'll have nothing, I'll hand over the keys and start all over again (I actually quite like the idea of that).

 

Had I taken out a loan to buy the same car my monthly payments would be higher, I would have paid a larger deposit and, at the end of two years when I came to sell it/trade it in, the depreciation on a new car means I'd be starting all over again anyway..... and my 2 years of ownership would have involved a greater capital outlay.!

 

It's my first venture into PCH and I guess it all depends on finding the right deal, a deal that suits you.

 

I'll report back in two years and let you know how this has worked out for me...

 

Terry

[r08shaw]

I wrote a bit on leasing on HotUKDeals. Have a look here: http://www.hotukdeals.com/misc/car-leasing-1112515?p=13713452

Save's copying and pasting...

[NX01]

Thanks everyone for the insights, it is not something I had considered before as I always stopped at the "you don't own anything for your money" but bottom line is how much is spent out on a car you do own versus one you can hand back and just start again.

 

Interesting information and certainly will be looking deeper and considering all options in the future.

[GAG]

I have entered into a Personal lease (no option to buy) deal for a new Skoda Superb SE L Executive Estate in business grey with a spare wheel extra.

 

It is from my local Skoda dealer and is a 3+35 month contract with 12,000 miles per year. i.e 36000 at the end of term or pay 7pence per mile for every mile over .

 

The initial 3 months payment is £900 and thereafter 35 monthly payments of £300. This includes road tax and two free services.

 

Total outlay is over the three years is £11,400 which is more or less the depreciation on the car and when you throw in the two free service’s and the road tax it works out a pretty good deal in my mind.

 

This will be the third car I have leased and I find that it suits me. I am happy not to own the car. I change my car every three years without having to take out a bank loan and I like the fact that I do not need to go through the ritual of trying to haggle the best price for a trade in or trying to get the best price on the new car. 

 

[teebs]

Some good and sensible comments above. If the total lease price is less than the proposed depreciation, then it's certainly the right way to go when buying new. Doesn't really work for used cars as much as manufacturer incentives are generally behind new vehicles.

 

We've thought about it for my wife's car, but given how relatively few miles per year she drives, it's not worth it. The used  Focus she has now (61 plate) has cost us £105/month in depreciation so far, so way cheaper than leasing a new car.

Edited 11 April, 2017 by teebs

[Sagalout]

There is one caveat to PCH deals that perhaps needs to be mentioned here. If you need/want to cancel the hire then you are not in the same position as with a PCP. You have agreed to hire for x months and if you cancel early there will be charges. Before entering such a contract you should check carefully what those arrangements would be. 

 

 

[Shhhkoda]

Personal leasing works for me, I've been doing it over 10 years. But not everyone likes the fact that they paid out a significant sum over anything from 2-4 years with nothing to show for it. But as someone indicated earlier in the thread, what's the difference between buying a new car every 2-4 years with a bank loan then using that car that you own as a part exchange in the next deal and jumping straight back into another new bank loan. 

 

If you consider personal leasing here's my top 10 tips to think about:-

 

1. Prices are set quarterly so every 3 months the prices will change, I've generally found quarter 4 prices (Oct to Dec) are cheaper and you often need to order 6-12 weeks in advance of when you need the car depending on manufacturer/model so consider the timing.

2. High spec cars (e.g L&K) don't always work best for leasing with higher depreciation which effectively is what you are paying.

3. Smaller v larger deposit against smaller v larger monthly payment is irrelevant, it's all about what you pay in total over the full length of the contract.

4. New models and end of line models from manufacturers often have incentives and great offers. The Superb when it first came out had great deals. The outgoing Audi A4 had similar good deals.

5. Loading up a car specification with extras can add quite a lot to the monthly price, better to go for a medium high spec car that includes extras.

6. Be prepared to move around manufacturers for the best deal, I show no allegiance to one but go where the best deal is. 

7. Slightly contentious but I've found the best deals have always been via brokers and not dealers.

8. Shop around don't go for the first offer you see, believe it or not you can pay as much as £50-£100 a month more for the same spec car from different brokers.

9. Generally a longer term deal will provide reduced monthly payment and certainly less deposits, i.e. 8 years leasing via two 4 year leases is 2 deposits, compared to 4 deposits on 2 year leasing. 

10. Even though initially you might take on a personal lease with no final purchase option, once you are well into the lease the broker is often open to let you purchase if you want to. They will even consider mileage adjustment during the contract and don't get too hung up on the fixed mileage you initially adopt, you only pay for excess mileage around 7-9p per per mile which can work out cheaper that way than paying more monthly for underused mileage. 

[DH- Leeds]

I've never quite got these PCPs - especially as I was persuaded to take one out years ago after being advised that the return of one car would act as the deposit for the next. It didn't!

Just checked on the Skoda UK website and for my favoured model (petrol SE L Exec 4WD estate) the figures are as follows:-

Deposit:  £5079.75

(Skoda "contribution" £2500)

Monthly:  £437.39 x48

Option to Buy: £9125.10

Total payable: £37272.18

Total credit: £26285.25    Representative APR 4.8%

 

It appears I could get a loan from Sainsburys bank at 3.9% APR - surely that's a better option as I would have the car at the end which I could then PX as deposit again - rather than having nothing AND having to find a cash deposit for my next car in 4 years?

I suppose it depends whether you are likely to have a spare £5000 as a deposit in 4 years.

Or am I missing something??

[GAG]

32 minutes ago, DH- Leeds said:

I've never quite got these PCPs - especially as I was persuaded to take one out years ago after being advised that the return of one car would act as the deposit for the next. It didn't!

Just checked on the Skoda UK website and for my favoured model (petrol SE L Exec 4WD estate) the figures are as follows:-

Deposit:  £5079.75

(Skoda "contribution" £2500)

Monthly:  £437.39 x48

Option to Buy: £9125.10

Total payable: £37272.18

Total credit: £26285.25    Representative APR 4.8%

 

It appears I could get a loan from Sainsburys bank at 3.9% APR - surely that's a better option as I would have the car at the end which I could then PX as deposit again - rather than having nothing AND having to find a cash deposit for my next car in 4 years?

I suppose it depends whether you are likely to have a spare £5000 as a deposit in 4 years.

Or am I missing something??

 

It all depends on which type of "lease" you want and if you can get your head around not having a car at the end of the contract. In order to do that you just need to work out whether you want to keep the car after the contract and how much it is worth at that time or if you don't want to keep the car how much it will have depreciated and is the lease cost more or less the same as that.

 

PCH or Personal Contract Hire, you only put down 3 or 6 months hire payment in advance followed by the monthly hire payment. You do not have the option to buy the car. You just walk away. It is basically just a long term car hire. You do not need a big cash deposit and monthly payments can be the same or less than a loan repayment.  

 

The PCP or Personal Contract Purchase is what was previously known as hire purchase. You are basically paying for the car by putting down a large deposit and then monthly payments over a given period. At the end of that period you have the option to either make a final payment so that you own the car or you can decide not to make the payment and just walk away.

 

As regards getting a loan to buy a car, if you change your car and use it as a deposit at the end of the loan period, say every four years, you are effectively doing the same as a PCP in that you are putting down a large deposit (your old car) and have a monthly repayment over the period of the loan. It may be cheaper with a bank loan but if you shop around for lease deals it might not be. Plus points are you do own the car at the end of the loan and you don't need to make a final payment (because your monthly payments have been higher) and if you don't trade it in you could have a few years of no monthly repayments but your car is depreciating in value.  

 

There are pros and cons for both types of contract and bank loan. You need to work out which one suits your pocket and needs. Personally I don't want to own the car after the contract ends so the PCH suits me best.

 

Keep in mind the quote from the Oil Baron Paul Getty, "If it appreciates. buy it, if it depreciates, lease it".

 

 

[CheshireBumpkin]

7 hours ago, GAG said:

I have entered into a Personal lease (no option to buy) deal for a new Skoda Superb SE L Executive Estate in business grey with a spare wheel extra.

 

It is from my local Skoda dealer and is a 3+35 month contract with 12,000 miles per year. i.e 36000 at the end of term or pay 7pence per mile for every mile over .

 

The initial 3 months payment is £900 and thereafter 35 monthly payments of £300. This includes road tax and two free services.

 

Total outlay is over the three years is £11,400 which is more or less the depreciation on the car and when you throw in the two free service’s and the road tax it works out a pretty good deal in my mind.

 

This will be the third car I have leased and I find that it suits me. I am happy not to own the car. I change my car every three years without having to take out a bank loan and I like the fact that I do not need to go through the ritual of trying to haggle the best price for a trade in or trying to get the best price on the new car. 

 

 

Pretty much the same deal I have - I pay about £10 less a month, but don't get the free servicing.

 

[Whaty]

There is another thing to consider with PCH (and PCP if you do not intend to buy the car at the end of the term), the car must be returned without any damage.... Scuffed wheels, damaged paintwork, dents (even minor dents if they are visible) can lead to charges being applied because they will affect the resale value of the car. It's often better to have the car repaired before you return it, this way you can get the most cost effective repair.

 

 

 

 

[IJWS15]

20 hours ago, teebs said:

Some good and sensible comments above. If the total lease price is less than the proposed depreciation, then it's certainly the right way to go when buying new. Doesn't really work for used cars as much as manufacturer incentives are generally behind new vehicles.

 

We've thought about it for my wife's car, but given how relatively few miles per year she drives, it's not worth it. The used  Focus she has now (61 plate) has cost us £105/month in depreciation so far, so way cheaper than leasing a new car.

 

I have seen deals on Jukes for less than £100 a month so if you are not worried about what you drive . . . . . . . 

 

One source of prices   www.contracthireandleasing.com/personal/car-leasing/

Edited 12 April, 2017 by IJWS15
Add info.

[IJWS15]

On 4/10/2017 at 08:48, smo_1981 said:

I could run it as either a business lease through my company or a personal lease - just pay it from either the business or my personal bank account, obviously the latter would have VAT which couldn't be reclaimed.

 

Do you take into account the cost of NI payments the business has to make on the benefit it is providing to you?

[teebs]

7 hours ago, IJWS15 said:

 

I have seen deals on Jukes for less than £100 a month so if you are not worried about what you drive . . . . . . . 

 

One source of prices   www.contracthireandleasing.com/personal/car-leasing/

 

That wouldn't be £100/month all in though. I'll have a look, but that would need a hefty deposit to start with. Anyway, buying outright works for us.

[Whaty]

One of our lads is in a Corsa 1.4 Special Edition (Black, black alloys, decent spec), he got it on a 9+23.... £810 initial deposit and £90 per month. Like a few people have commented, if you're open minded there are some good deals to be had.

 

If you think about it, he's driving a brand new car with manufacturers warranty, full breakdown and recovery, VED and the peace of mind that all that brings for less than £1500 per year.

 

On his contract he is responsible for the servicing but that should only be one minor service.....

Edited 13 April, 2017 by Whaty
Additional information

[T-1000]

There is a great leasing thread over on the pistonheads forum. 99% of the time it is cheaper to actually lease on the least miles so say 5k miles a year. Then if you do 15k a year instead of paying the excess mileage up front many people will phone VW finance half way through the lease and confirm the actual mileage. VW generally will revise the monthly rate to incorporate the new mileage but at a lesser rate so instead of 7pmm they will calculate it at 3.5p per mile making the lease over the term cheaper than paying upfront. I hope that makes sense. Check out the pistonheads lease thread loads of valuable info there.