How Leasing Can Help You To Drive A Much Better Car

Friday, 16. January 2009

What would you really like to drive? Over the years I have helped many thousands of businesses and individuals to drive ‘better’ cars. For some a ‘better’ car has actually been the car of their dreams, for others it has meant a lot more car for their budget and for others the car they had planned on driving but for much less money. Every client has different aspirations and there are of course some that I would never be able to help as they enjoy driving cars that have had one or more previous owners, would never dream of paying more than £3,000 for a car and enjoy nothing more than carrying out an oil change at home over the weekend. But if you have felt the only way to get good value out of a car is to buy a second hand car ‘after it has lost its initial depreciation’ then maybe it is time to have a re-think. If you have always wanted to drive a new car but for the ‘lost depreciation’ reason have never been able to commit to one then think again and talk to me. We all know that a brand new car is cheap to run in terms of service and maintenance costs. It was 14 months before my current car had its first service which was a simple oil change. But what you may not know is that you don’t even have to have your new car serviced at a main dealer, paying high parts and labour costs, you can go to Halfords or Kwik Fit or even your local garage provided it’s a proper repair garage and still be covered totally by the full manufacturer’s warranty, which is another benefit to having a new car. New cars are safer with the latest safety features such as ESP, brake assist and air bags everywhere and they are generally far more fuel efficient. So there are many reasons why you should want to drive a new car including your own feel good factor. It is so much nicer driving a brand new car than a used car but there is still the problem of that heavy depreciation when the car tyres first touch the road. As a rule of thumb a car loses on average 30% of its value in its first year but supposing you could buy a brand new car with a 30% discount? In other words a new car costing £10,000 could be bought, as a year old car, for £7,000 but lets say you could buy a brand new car for the cost of a year old car, ie. £7,000? Well I’m sorry to say this is a rare occurrence unless a dealer is desperate and has been given some assistance by the manufacturer in order to clear his stock. But for leasing companies this is an every day event. It’s not unusual for the leasing company to achieve a 10% discount (or more) from a main dealer then be offered a further bonus of several £000’s by the manufacturer based on volumes etc. So when they calculate the monthly rental they factor in these large bonuses making the monthly cost very cheap with you benefiting from a car being purchased as brand new but at the price of a 12 month old car or even less. Some manufacturers will sell a better spec car for the same price as a lower spec. For example one of my leasing companies could buy a BMW M-Sport for the same price as an SE which ended up making the M-Sport much less on a lease than an SE. Let me explain with a simple example:

We have two cars, an X and an LX. The X has a price of £10,000 whilst the LX has a price of £12,000 but the manufacturer is making the LX the same price to the leasing company as the X so now both cars are costing £10,000. But cars drop, on average, by 50% over 2 years of their list price, so let’s see what happens over a 2 year lease.

	X	LX	Revised LX
Cost of Car	£10,000	£12,000	£10,000
Future Value	£5,000	£6,000	£6,000
Net Cost	£5,000	£6,000	£4,000

I’m going to make the situation even better, lets say that there is a basic car called an S that sells for £8,000, let’s add this one into the equation:

	S	X	LX	Revised LX
Cost of Car	£8,000	£10,000	£12,000	£10,000
Future Value	£4,000	£5,000	£6,000	£6,000
Net Cost	£4,000	£5,000	£6,000	£4,000

So whilst there are other factors such as admin costs and interest charges to add in you can see that whilst the leasing company may be able to buy the LX for the same price as the X you would be able to lease the LX for around the same amount as the basic S and that’s the magic of leasing with no risk in the resale of the car. This is also why I am the UK’s leading expert on Car Finance and I give away this information for free! However, if you really want the inside track on how best to finance your next car you should buy my book, ‘An Insider Guide To Car Finance’. By Graham Hill