To Lease Or To Buy
Leasing is a fantastic way to own a new car and change it every two or three years without losing thousands of pounds in depreciation. The car is covered by the manufacturers warranty, the Road Fund License is included, and roadside and breakdown cover is included also.
Very few people have the capital to buy a new car without some sort of finance. Even if you can afford to purchase a new car outright you will still lose a great deal of money as soon as you drive off the forecourt through depreciation.
The alternative to buying or leasing a car is to buy a car through dealer finance or to take a personal loan. Often two or three years later when you choose to change the vehicle you discover that the settlement figure is substantially higher than the trade in value, therefore resulting in negative equity. There are two outcomes available to you at this point:
Option one
You continue with the car through to the end of the finance period at which point you own the car (which might be worth little by this point), or you can then sell or trade it in against a new vehicle.
Option two
You fund the negative equity with the new car finance through the dealership, e.g you have £2500 of negative equity and the new car is £10,000, you finance £12,500 against that car. Three years later you again want a new car, but you still have negative equity however this time it has doubled as you started £2500 down at the point of sale.
The solution to this is leasing.
Buying v Leasing Example:
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Certainly it is a fact that at the end of the lease you will not own the vehicle, however the money that you have spent on the lease would have been lost through depreciation if you had bought the car outright. The value of a car depreciates the same amount whether it is leased or purchased. That money is lost whether lease or you buy, but at the end of the lease you do not have the aggravation of selling the car in order to buy another, and if you are on a Personal Contract Purchase lease, you have the option to buy the car for the price which was set at the outset.
With leasing, you have the option of putting your monthly savings or lump sum into more productive investments such as ISA’s.
