[Mark07]

My mother-in-law recently picked up a new car (Ford Kuga), but it turns out she's taken the option of leasing it.

I'll be honest, I had to google the main differences with leasing, which include;

• Lower payments
• Short term commitment
• No option to buy
• Mileage limits

Have you ever leased a car and would you recommend it?

[olduser]

I have never leased a car, I have driven leased cars for work.

As far as I understand it, the model for leasing vehicles assumes that at the end of the lease the vehicle has value, to ensure this the mileage is limited and vehicles have to be fully serviced, they usually insist servicing is at an approved dealership. ( Servicing can be included in the lease, for a fee, also annual tax.)

If the vehicle is not serviced, the contract is broken, the lease ends with some penalty clause reimbursing the leasing company for loss of earnings.

The vehicle belongs to leasing company but you have the option to purchase at the end of the lease, this will be at the book price (Glasses Guide etc.)

I see, they are claiming you are protected from the depreciation on a new vehicle, in fact depreciation is built into the leasing fee so you still suffer but it is just hidden.

The leasing Co will be buying lots of cars so he will get a good price, though for his calculations he will use the list price.

The final calculation for leasers will be something like, On road list price + road tax for life of lease + return on capital + cost of capital + roadside cover + insurance of debt + overheads + profit margin - up front fee - residual value all divided by number of months of lease.

I haven't done the sums but the gut feeling is outright purchase wins even borrowing money from your bank would cost less.

Leasing for commercially owned vehicles makes sense because it avoids using capital, and leasing costs were tax deductible.

For a private individual, interest on money in the bank is always going to be less than interest on borrowed money so the argument that you keep your money in the bank is not valid.

[Beelzebub]

@olduser There is no automatic right to purchase ar the end of lease. It’s entirely at the leasing company’s whim, unless it’s included in the contract.

[Drivingforfun]

I agree with the post from olduser

The only thing I would add is I agree that the claim that leasing "protects from depreciation" is inaccurate, but I don't think it's totally misguided. Maybe a better statement, seeing as assumes the amount of depreciation, is that it "protects from uncertainty". As with fixing the price of anything it can work in your favour or against; though overall the average customer will lose out...but it's entirely possible that no single customer matches the average and many will find it's worth paying for the certainty

[olduser]

Originally Posted by Drivingforfun

I agree with the post from olduser

The only thing I would add is I agree that the claim that leasing "protects from depreciation" is inaccurate, but I don't think it's totally misguided. Maybe a better statement, seeing as assumes the amount of depreciation, is that it "protects from uncertainty". As with fixing the price of anything it can work in your favour or against; though overall the average customer will lose out...but it's entirely possible that no single customer matches the average and many will find it's worth paying for the certainty

The point I was trying make here is based on talking to private individuals who have leased.
The value at the end of the lease was the book price, or that is the price offered if they wished to buy the car.

I suppose with a new model, there will be no history to go on, though I think different manufacturer tends to have a similar consistent depreciation over all models, this can then be used to estimate for a new model, until there is some real life data to work on.

I suppose, on the one hand if the car turns out to be so bad it has a very low end price, you are protected but on the other hand, if the car is as bad as that, you are stuck with it until the end of the lease.

I forgot the plus side of leasing, it avoids the haggling when buying and later when selling, on the whole, I don't think brits are very comfortable haggling, and though the leasing co will have borrowed the money, they will get a better rate than an individual can.

Of course, all of what I have said is just my view.

[olduser]

Originally Posted by Beelzebub

@olduser There is no automatic right to purchase ar the end of lease. It’s entirely at the leasing company’s whim, unless it’s included in the contract.

I think. that is the case for a business leasing a vehicle, it would have no use for a used vehicle, I think a vehicle has near zero value at about three years old.

I can see on a domestic lease, it would make sense to offer the option to buy, of course the leasing co would rather the customer took out a new lease on a new car. (as a second hand vehicle, it will have had regular servicing, if it looks ok not a bad buy.)

As far as I know, at the end of the lease the vehicle is vetted looking for damage etc, if anything is found that affects final value, they will charge the customer for this.

One company I worked for leased Corsa vans, these had variable inertia flywheels, several vans in the fleet with higher mileage had to have new flywheels fitted near the end of the lease.
They had to pay for this work, before the vans could be returned at the end of the leasing period, as it turned out, there were no spares in the UK, so the vans were off the road.
The company accountant said, as well paying for the repair, they had to pay the garage rent, the vans were in bits.
By the time the vans were re assembled, they were driven to the collection point for the end of the lease.
In the mean time new vehicles had to be leased as replacements.
We suggested the vans could be bought at auction, and used for another year but apparently this was not viable.

[Rolebama]

I have a brother-in-law who has been leasing for twenty-odd years. He swears by it. He has had a succession of SUVs. I buy outright. I reckon my costs have been around 70% of his as much as every time he has handed one back, he always gets a bill to repair the defects.
Just my twopenceworth.