The Benefits, Lease or Buy?
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The main benefits of personal car leasing. Is it better to lease or buy?
Paul Getty (oil tycoon) – “If it appreciates, buy it…if it depreciates, lease it”
Personal car leasing or Personal contract hire is becoming increasingly popular throughout the UK as more and more drivers are becoming aware of its benefits. However, many drivers who could benefit from contract hire and leasing their car are still taking out expensive car loans or hire purchase agreements to aquire their vehicles.
This reluctance to lease is usually due to a lack of understanding of the outstanding benefits of contract hire. At Competitive we are here to improve your knowledge so that you have greater knowledge of the leasing industry!
Personal car leasing benefits
Sadly a car or van is not like a property which usually appreciates in value after you buy it. As soon as you take delivery of a brand new car it is already losing value. Therefore, if you take out a loan or a hire purchase agreement to buy a car, every month you are simply paying a set amount for something that is losing value.
Summary of car leasing benefits:
No huge up front costs, car loans or capital outlay. In most Contract Hire agreements a small initial rental is required. This usually amounts to three times the cost of the monthly rental.
Monthly repayments will on average be considerably less than repayments of a car loan.
Peace of mind. The rental costs will remain at the same fixed price throughout the duration of the lease.
Usually the cars warranty period will cover the duration of the lease and various mainteance packages can be added to cover servicing, tyres etc.
Road Fund Licence is usually included in the monthly lease price for the duration of the contract.
You will be able to drive a car that may be out of your budget in terms of purchase price.
You get to drive a brand new car every two, three or four years!
Here’s a question that we often get asked: “Why do some people lease their cars rather than buy them…?”
The answer is very simple: the cost savings can be huge, especially if you want to change your car every 2 or 3 years.
To demonstrate, here`s an example of one of our current offers on a new Vauxhall Astra Diesel Sport Hatch 1.9 CDTi SRi [150] 3dr:
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Buying
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Leasing
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New price
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£ 19,705.00
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Initial rental
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£ 554.97
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Typical online discount
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£ 3,165.00
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35 subsequent rentals
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£ 184.99
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Discounted price
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£ 16,540.00
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Total rentals
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£ 7,029.62
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Road tax (year 2)
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£ 120.00
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Total VAT payable (@ 17.5%)
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£ 1,230.18
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Road tax (year 2)
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£ 120.00
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NB: current VAT rate = 15%
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Typical 3-year repayment *
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£ 18,873.36
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Sale proceeds **
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£ 7,675.00
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Total cost of motoring
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£ 11,438.36
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Total cost of motoring
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£ 8,259.80
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Saving
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£ 3,178.56
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** “Sale proceeds” based on used trade value at 36 months old with 30,000 miles on the clock – according to CAP Motor Research data (Mar 2009)Simply put, leasing this car will save you over £3,000…!What cars should I lease?It is of benefit to you if the car that you lease loses as little value as possible over the term of your lease agreement. Generally, cars made by German manufacturers such as Audi, BMW, Mercedes and Volkswagen depreciate much less than other makes. Thus the VW Golf and Audi A3 are very popular to lease due to the high residual value remaining at the end of the contract. This benefits you as it means cheaper monthly payments.How is the monthly lease price determined?The lease price of a car is calculated upon the initial purchase price of the car its age, mileage, condition and residual value. So if a car loses less value and has a lower lower mileage, it`s residual value will be higher.It will then cost less to lease.Useful definitions:
Depreciation – this is the reduction in a car’s value caused by age, mileage and condition. This is usually greatest in the first year. The make and model of the car also has a large effect on the depreciation value.
Residual Value – this refers to the predicted value of the car when it reaches the end of the lease agreement. This amount is important as the monthly repayments will be based on the difference between the initial purchase price and the residual value.
Overview
We hope that this has given you a useful insight into the benefits of Contract Hire and leasing. If you have any further questions, please do not hesitate to contact our friendly staff, they will be delighted to help you.
GET THE BEST DEAL…..FILL IN OUR SIMPLE ONLINE DEAL FINDER NOW!!
Our friendly staff will be delighted to help you. Contact us now on 0844 880 2472….. you won`t be disappointed!
All information contained in this website is current at the time of publication and whilst the greatest care has been taken over its compilation, Competitive Car Leasing cannot be held responsible for any errors or omissions. All photographic images are for demonstration purposes and may not depict the relevant model.
Competitive Car Leasing is a Licenced Credit Broker : Licence Number 616673
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