‘If it appreciates, buy it. If it depreciates, lease it’. Wise words by Paul Getty, a billionaire oil tycoon. And that's why I now always lease a car! You might be wondering if you can save money with a lease car, or whether it really is good value for money. Here are my thoughts.
Let's rewind a couple of months. One Sunday, my friend and I go to the cinema and grab some lunch, and of course, the topic of the rising cost of fuel came up. I was absolutely astonished to find that friend gets 600 miles per tank (£55 at most) of diesel, whereas I was getting 330 miles if I was lucky on £60-£65 a tank full of petrol. I'm no mathematician, but I figured out that I needed a new car! I could not go on spending £300 a month on petrol a month and drive the car I was driving – not quite an old banger, but knocking on 10 years old and a car that I didn't feel unsafe in, but I didn't feel particularly safe in. I bought it in a rush when my old car was broken and if I had more time to carry out proper research then I would not have bought that car.
Decision to get a new car made, where do I go from here? I've been working really hard to pay off my debts so I didn't want to take out a loan for a new car. My boss is a big fan of car leasing, then my colleague's wife got a lease car and the seed was planted. I did a lot of research and a lot of talking things through with my Dad, who Knows About Things. I worked out that the MPG on the particular car I was looking at would reduce my fuel bill to £150, freeing up £150 that I already paid for petrol month in, month out; plus the pleasure of driving a brand new car. Decision made: I was getting a lease car.
How a lease works
Leasing is really simple but there are a lot of options and fees that aren't exactly clear when you see a price on a website. The first thing to take note is that there is usually a deposit to be paid, equal to anything from 3 – 12 months of rental in your first payment. The number following that is then how long you will lease the car for. It's important to work out the total lease cost – so 3+23 would be 26 payments of whatever you're quoted as the monthly fee, 6+23 would be 29 payments, etc. In my instance, I've opted for a 3+23 lease, meaning I'll have the car for 2 years (the first payment is a deposit taken in the first month and the remaining 23 months make up the two years). It is worth juggling the numbers and seeing what works for you – don't always assume that paying more months in advance means that you will be paying less money in total – work out all the options available to you.
Secondly, unless explicitly stated, there's a documentation fee. The name of it might change slightly between companies, but this is their commission payment for arranging the finance, delivering the car to you and taking care of everything else. I was quoted anything from £199+VAT – £225 including VAT, so between £200-£250 seems right. Don't forget to factor this in to your planning.
Thirdly, you will need to set an annual mileage. These are usually set between 8,000 and 10,000 miles per annum and I opted for 20,000 as my commute is 12,000 per annum. If you go over your annual mileage allowance then you will have to pay a fee per mile when the car is collected at the end of your lease. I was quoted 3.2p per mile (including VAT) from one company, so for every 1,000 miles you go over, you'll be charged £32.
And finally, remember that the fixed monthly fee includes certain things such as car tax, and of course you don't need to have an MOT on a new car. Major repairs (not wear and tear such as tyres) are paid for by the leasing company. You will have to pay for an annual service, as a main dealer which set me back about £150, and then I also have to pay for insurance and fuel.
Can you haggle
The price quoted is pretty much the price you get – there may be a little leeway, but I wouldn't count on it. You could of course get the cheapest price online, then visit your nearest dealer and ask them to price match the online price.
The documentation you are required to provide does vary between lease companies. Typically you may need:
2 x proof of address
3 month's bank statements
3 month's payslips
Driving license – photocard and paper counterpart
What happens at the end of the lease
Once the lease is over you will have a few choices. If you do nothing, the lease company will come and collect the car and then take the car to auction and sell it. However, they might offer you the option of extending the lease, taking out a new lease or buying the car from them. Me? I'm putting some money away so that if at the end of the lease they offer me an amazing deal to purchase the car, I'm in a position to do so.
Other stuff to consider
Picking a lease car didn't save me much money in the long run (I didn't have to pay for an annual MOT or car tax) but I did have the pleasure of driving a brand new car. Driving a brand new, £20k car, instead of my £2k car actually lowered my insurance premium by £50 for the year. It is important to get quotes before you commit to the lease – be sure to check GoCompare, Moneysupermarket and Confused.com as well as ringing your own insurance provider. My provider said they'd change the policy and charge me £180 for 5 months, whereas a whole new policy was £292 for 12 months. No brainer.
Delivery can be anything from 7 working days if the main dealer have anything in stock up to 10 weeks if your car needs to be ordered in or specially built.
You may need to pay a refundable deposit – Select Contracts asked me for £300, refunded upon delivery of the car, to cover any cancellations.
So a lease really worked out well for me. I know that some people have the opinion of it being a waste of money, but I get to drive a brand new car, I don't pay for road tax and if anything does wrong, I'm not facing a hefty repair bill.
Ps. driving a new car is lovely <3
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