When Leasing A New Car Don’t Think Like A Buyer
Thursday, 13. April 2017
Just recently I have had a few enquiries for cars where customers have asked for a fairly low spec. car then added a pile of extras on it increasing the monthly repayments dramatically. In one instance a client had a problem with static from the seats so wanted leather seats but in terms of creature comforts that was all he wanted over and above a fairly standard car.
We priced up the increased cost of leather when added to the rentals on the standard car then, out of interest, I priced up the car that was two spec. levels above the standard car which had, amongst other things, leather as standard. Even though it had much more kit as standard it still worked out cheaper than the standard car with leather added.
And this is the case on many occasions when I have compared a low spec. car with extras added with a higher spec. car with all the extras as standard. The reason for this is several fold. On average a new car, on average mileage, drops to around 40% of its original list price after 3 years. However, added options will rarely return 40% after 3 years, except metallic or pearlescent paint.
In many cases the added options add nothing to the resale value of the car, at best it may make the car a little easier to sell on a dealer’s forecourt. And when the cars go through auction at the rate of one every 3 minutes traders probably wouldn’t even notice that the air con has been upgraded to climate control or the Sat Nav screen has been changed from a 5” screen to a 7” screen.
In some extreme cases extras can reduce the resale value of the car, for example a tow bar. On the other hand the car with the higher spec. only increases the cost of the car by a fraction compared to the increase if extras were added individually. But the resale value will still be around 40% of the purchase price. In addition higher spec. cars are produced in lower volumes but the used car buyers want as much ‘bang for their buck’ so the demand for higher spec. cars is higher than standard cars, even if the standard cars are fitted with a few customised extras.
So in summary it needs a change of mindset. Don’t think as a car buyer when leasing a car. Whilst the standard car with a few extras on may still be cheaper to buy than the next model up with the extras as standard (along with other features) the difference in resale value could be substantial making it as cheap if not cheaper to lease the higher spec. standard car. Talking to an expert can help. That’ll be me then! By Graham Hill