My takeaway from this video is that the rational path is to just buy a used 3 year old car. Three years old is still pretty new, but some other sucker will have already suffered the majority of the car's depreciation.
Exactly what I did, 3 year old Toyota with 2 years warranty remaining. Looks & drives like a new car. Service it with Toyota & warranty extends to 10 years. No brainier in my opinion.
At the start of the video Rory makes clear that this is about new cars, though. It can be more economical if you, for some reason, always want to buy a new car, and periodically want to change your car.
And take it to a first rate certified mechanic. That is what I did for my 928 and 968. Spent a few thousand having the heads removed, thoroughly flushed, new radiator, etc. Replaced the hideously expensive titanium exhaust with stainless steel, new struts shocks & bushings, change the tranny & diff fluid, new brake pads & a thorough cleaning. Both were like new cars & still 10's of thousands less than new. And I didn't feel guilty beating on them.
100 pcent In aug 2015 I bought a 2010 bmw 320d 121k on clock for 6k. Its now worth atleast 1500. Repairs in the 8yrs iv had it....about £550. Plus maintenance tires, service etc. I know th videos about buying new..but used does make financial sense in across th whole range of car models. On the other hand my 2015 cayman went up in price lool (well for a short while, covid etc and then maintained that high price for a while, didn't cash in though). Finding a good reliable used car makes alot of sense if trying to maximise your money.
Great video Rory. Just a couple of things to consider: when handing back your lease car the company often find reasons to charge extra for ‘damage’ (ie small scratches on the body/wheels etc) and if you buy the car, you have ultimate flexibility to sell wherever you please. If you lease you are kind of stuck in a long term contract with significant penalties to exit.
You get charged for damage when you sell your car. Lease companies in the UK use BVRLA standards for fair return conditions. No one gets ripped off for fair wear and tear.
@@_bav or you had damaged a car and had to pay for it to be repaired, just like if you were to sell or px... Scratches don't grow over time, they are caused by neglect.
I had 2 car finances and owned 4 cars in space of 5 years. I have learned that I have always lost cash on finance. On my second finance, I had to pay £1100 to get the finance cleared due to high %, depreciation, and inflation... The best option is, buy a 1 or 2 year old car when it's still new, had already lost 20-30% of it's value and either get a low % loan via bank, 50/50 bank loan own savings or buy outright with your own money.
Also worth mentioning 2nd hand car market is extremely strong right now, I bought a 2016 340i which at the time 3y old for under 20k, traded in this year after 4y of ownership and got 18.5k, essentially lost only 1.5k in 4 years. You can't even lease an electric pushbike for that 😂
@@johnjackson2349 Sounds great initially. But try going out now and buying a 3 year old 340i. You’ll pay way more than you did 4 years ago! It’s the ‘cost of change’ that matters, otherwise you’re not comparing apples with apples.
@@MbeezySheeshif everyone followed this advice there'd be no used cars to buy, someone has got to take that hit buying new and very few people can afford to pay outright for the average price of a new car
Two different aspects that weren’t mentioned. 1. The figures were based on buying at full retail, any discount negotiated at point of purchase can be subtracted from the overall cost of buying to selling. 2. For someone who physically has the cash to buy, the interest they could gain leaving the money invested and leasing instead, can be deducted from overall cost of a lease.
also if you buy, you have an asset (albeit depreciatng) and can sell if required, and when you do sell you can use that as a deposit for your next purchase. If you lease, you are in a contract to pay that amount (what happens if you lose your job? an penalties fore returning early?) also what do you use as the deposit for your next lease?
Polestar 2 is worth £21,823 after 3 years, however the cheapest 2020 I could find in the country was £26k and that one has 76k on the clock the next cheapest is over 27k.... Worth mentioning if you but a 'new' car the longer you have it the less you loose per year, for example if a car looses half its value after 3 years it doesn't loose the other half after another 3years, it still will have significant value not zero meaning the monthly loss is less the longer you own it
Initially thought the same thing, but if the conversation is about selling it back to dealer then the figure lines up. Dealer is selling my wife's Up! for 3k more than they took it for on PX at the end of her PCP, so 4k on a Polestar 2 would seem about right.
@@96cyt Exactly.. It is how much you can get from a dealer.. not how much you see on the market.. by saying that, unfortunately, in general ,people buys the cars from dealer .. not from private sellers... I couldn't sold my Passat even If I asked %15 percent lower than a comparable car at the dealer... .. gave up and sold to dealer for even les..
Yeah, if you're the type of person to change/upgrade your car every year or two leasing makes sense, but if you plan to have the car for more like 5-10 years it doesn't make sense. That style of ownership is more realistic nowadays imo, the tech differences year to year aren't as drastic as they've been now that we have bluetooth and carplay with cars having computers that get updated inside. I'd bet the stat from this video of people changing cars every 3.5 years is heavily inflated by the subset of people who change their cars every year and/or own multiple vehicles and the median is at least more like 4 years.
EVs just depreciate a lot more the older it is because everyone thinks the battery is degraded which they do about 2-3% per year and replacing it cost about 20k for Teslas in example. Demand is there but range anxiety and poor performance makes most people go back to ICE or hybrid . The direct sales model helps most electric car companies compete with the ones like BMV, Audi, GM, etc.
@@henrylam92 In addition to that, new Evs are charging faster and even the auxiliary systems are getting improved even If the battery technology and capacities stays same .... thats also a concern (well lets say should) for an EV buyer.. no one wants a slow charging car.. new EVs are getting better and better about this (and will be better) ..
I'm on my fourth lease car. The trick is to be open minded in the model you lease, dont use main dealers. I always go for cars on a deal. I've had an A4 £180/month 6 month deposit 2 year lease, A5 £220/month 6 month deposit 2 year lease, Arteon £270/month 6 month deposit 2 year lease and currently have an A6. I've never had to pay additional costs at the lease end. Treat the car as if you own it and look after it well. Wash/wax and valet before return, by myself. Also, I've been given the option to purchase each car at the deal end. Also, the savings are higher than stated in the video. Road tax and breakdown is included in the monthly lease, wheras these would be an additional cost of ownership.
@@merrichoang6858 your analogy is flawed. In Vietnam we have decade and 1/2 old Dodge Challengers and it still running on our roads. And old Mercedes platform actually helped it reliability wise.
Don't forget the cost of credit. Nobody drops £45k on a new car without borrowing, usually from the dealer on a HP or PCP product . Interest rates at the moment are often double digits so the cost of borrowing needs to be factored in too.
@@markus8484 you could still calculate the opportunity cost. If you invested the extra money left over from the lease in indexes like S&P 500, you'd get an average of 7% per year. let's say 7% of 35k for one year, 7% of 25k over the 2nd year and 7% of 20k over the third year. There are more than 4000 pounds in there.
@@dariusdareme yeah I know but nobody guarantees you the 7% profit. It can go down really fast and you have no profit at all or maybe a lost. I do investin stock market or etf as well but I never calculate with the profit. Furthermore you may gain the 7% but mostly on a long run. If you put 25k now in the (currently high) market and only a small decline of the economy or a war somewhere and you need years to get your 25k back.
Good video that shows benefits of lease. As a sales manager in the trade myself it would be good to do a comparison of lease against PCP to show the differences as they can be very similar in monthly payments but with some very significant differences in consumer rights and ownership. Also with interest rates now rising the 'cash conversion' angle is more valid.
Another bonus of leasing vs pcp on your credit file is the amount owed on your credit file is just your remaining monthly payments added up. Pcp is your payments plus your ballon and plus interest so is a lot more debt for the same car and can hinder more borrowing.
Went for a lease through work for an EV, was considering a polestar 2, but could get something more premium for the same monthly cost (it also comes with insurance/servicing). But thank you for making the video
Couple of things. Pre reg cars or a car that’s 3-6 months old so nearly new completely changes the equations as it takes out some of the depreciation. You also have to factor in the expensive of any damage to the car that’ll change the end value you’ve agreed or throw up extra charges at the end or a lease. Either way people should do whatever they prefer and makes sense for them
I have done well over the last 15 years…two used Passat models recently replaced with a newer model but close to the end of the model run so lots of extra kit…leather, sat nav, heated seats etc…then keep for 9yrs. Much much cheaper than the most expensive way to have a car - buy new and sell it just as most of the depreciation has happened. 😳
What you’ve not mentioned in the purchase options is the fact that many people won’t have the cash up front and will need a loan to buy a new car outright. So if you add the interest costs to the car price this makes leasing even more attractive in many cases.
Hang on to your old car, take the money you would have paid on a lease into a savings account, and in 3 or 4 years you will have enough to buy a car outright, and a car that you can then keep for years and years, instead of having to do the whole thing again when the lease ends.
At the end of the term if you’re circumstances have changed and you had bought the car outright you still have a car to drive around in, whilst you still have only lost pretty much the same as if you leased it. I guess if you’re self employed that at least some of the costs can be offset against your tax. If you own the vehicle you also won’t have any nasty surprises after 3 years had you damaged anything before handing it back on our shocking roads.
Rory, a couple of things not discussed: 1. Opportunity cost. If you lease a car, you can then invest the capital you would have used to buy it outright. Because there's an almost infinite number of investments one can make, it might be hard to give a fair explanation of what the potential return might be, but at least its worth TRYING to cover this in the discussion. 2. What are the limitations with leasing. For example, I live in Surrey and want to drive on the continent a few times a year. Can I do that in a leased car? Are there any concerns / considerations etc?
it comes down to how long you plan to hold on to the car. If you only plan to keep it for 3 years before selling, your generally better off leasing. But if you hold it longer, 5+ years, buying using makes more sense
And this only applies to new-new cars. Get it 3-5 years old & if you're worried spend the equivalent depreciation cost from it being new on various warranties, that makes the most sense. New cars are a rich folk game.
@@VarioFelceDealers are suggesting prices are softening considerably at the moment. However, high rates and absurd new car prices will hold used car prices up higher than pre pandemic.
I wouldn't do either nowadays as everything has an inflated price. It all depends on personal preference, what type of vehicles you like and how much spare money you've got.
If you want a almost new car buy pre registered. Car dealers do this to hit purchase targets from the manufacturer. This way don't get hit by the initial depreciation and it's cheaper than leasing. I personally saved £5k on a Skoda Kodiaq in 2018.
Biggest factor you missed is our keep with the Jones' mentality is that the fact that every car is a money pit, waste of valuable cash. Anyone with half a brain would want to buy a cheaper no nonsense a-b car and invest the hard earned income into property or ISA's for a fantastic cash rich future, private education for the kids & most important, a more prosperous future. Why would anyone want to spend silly money on a car instead of investing for a better more comfortable future is beyond me, Great vid as always Rory 😊
Cars are a passion and a hobby. Of course they cost much money and degrade very fast but as long as it makes you happy, it's well invested money. I love my car very much and LOVE to drive it every single time. Driving bus would make me crazy and no comfort while driving would do so too
I think some manufacturers offer flexible lease schemes as well. Basically what Rory talked about but at the end of the leasing duration you're given a choice to buy the car off the manufacturer if you want. And that's just a tip of the iceberg.
@@bloodstockvip2176 Did you check your settle value against the market price for the same vehicle? Iirc those 'buyout' options on leases are only offered when the automaker/dealer is going to take a lose on the lease (because the vehicle depreciated more than expected, so there is a difference between what you paid (for the lease) and what the vehicle is now worth.
The best advice I got was this. Lease Germans, Italian, and British. Now buy Toyota, Honda, Subura and Mazda. When buying. Save as much for the deposit, then go to your bank get a loan. Which you then pay of the loan. Which depending on how long you have been with and how much you earn, will affect the rates. Also it can help build your credit and help with other financial things. Not finance advice. Just something I have been told and seen upfront.
It's much better, as you can also get a lot of savings if you pay the car in cash. A friend of mine got €3K off a new Skoda Octavia. The interest rate of the loan was around 500 higher, which meant he saved 2.5K this way. Another thing to add is that if you get sacked, you can just put your car for sale, and pay out your loan. I've heard from car dealers that used car buyers don't fancy paying for leased cars.
One vital thing thats forgotten here is that once your lease is up you have to put down another initial payment on a new lease for a new car. once you do that you would be paying more to lease in the long run then just flat out buying a car. And this doesn't even factor in the Fee's companies will throw at you once you return the car.
The “initial payment” is really just pre-paying for depreciation. Your deposit lowers your monthly because of this. It’s not an “extra fee” on top of the lease, it factors directly into your lease payments.
Great video… a few other factors… 1) interest rates on both options 2) when you lease, if you have an accident claim, you can return at end of lease and decrease in value because of the claim is the dealers issue versus your impact on depreciation if you purchased and decided to resell (I.e., projected depreciation at the start will be greater as people expect to pay much less if there is a claim) 3) with technology advances happening much faster in cars, if the vehicle you leased has some major refreshes you can just get the newest version instead of being stuck with the old technology 4) EV depreciation is still a wildcard so leasing protects you from major swings like the recent Tesla price decrease 5) you get to “try it out” with a lease and still buy at the end if you liked it or dump it if you did not.. bottom line is buying used is the most prudent approach from a financial perspective but for a car enthusiast, leasing allows you to explore more often with the major downside being stuck in a contract that can be tough to get out of if your financial situation has a major change (loss of job etc.,)
was thinking same thing. This analysis tries to boil it down to just the obvious key differences in price, and then proceeds to completely miss a massive part of the equation, which is the lost interest from you sinking £40k into a car when buying it vs leasing. Most leases are the same or very similar total payments if you go 12+23 or 1+23. So the best thing is to go 1+23. Stick your £40k in the bank, and you are earning £2k a year on it. That's a £6k bonus to the lease option that is completely ignored. Very strange.
The only difference between leased and buying the car outright, is whether you choose to pay for the depreciation in a lump sum when you sell it, or in instalments. It’s as simple as that.
Wrong, means you didn't pay attention. Each car depreciation is different. A cheap civic for example. Is bad to lease. You would lose more But if you lease a high end supercar that's rare they appreciate actually. So it's better to buy, then flip sell it. It's called math buddy
Yup. Gotta be a mug to buy/lease a new car unless you literally have more money than you know what to do with. And modern cars are a total yawn fest anyway.
Leasing is LITERALLY cheaper. Like the monthly amount difference could be almost $500 less for a luxury Car. This is for people who will always keep having a New car around, some people hate old cars.
Given examples like the Polestar. Still always prefer the finance option. Gives you the option to keep it. That next 3 years of ownership is when the depreciation settles down and the car is still very 'young' at £24k miles. So you get to enjoy the benefit of your hard earned payments in the first 3 years. Yes, you still have to refinance the balance or pay outright. But after 6 years that Polestar will still be worth £10-14k and you own the lot. Meaning the total cost of ownership (excluding bills) is £31-35k rather than £45k. Leasing genuinely only suits someone that always changes their car every 2-3 years.
This is a great video, but as you mentioned it is specifically for new cars. I think buying a used car 3-4 years of age is what a lot of people would do (due to the significant depreciation as you mentioned). I'm not sure if you can lease cars of that age/mileage, but if you were to carry out the same assessment would the result be to buy the car?
It's mostly a case of doing the same math... look at the purchase price, try to figger out the likely sale price - and that lets you calculate the likely depreciation in value. Compare that depreciation value against the total cost of the lease, to see which approach is better. The biggest risk is in trying to 'guess' the future relase value in order to work out the depreciation.
Buy 5 year old used from main dealer low mileage 1 owner with 2 year warranty with guaranteed mileage and full hpi checks done. Keep until it falls to pieces 15 years later. Leasing is for mugs with more money than sense that think they are big hitters on 40 grand a year. The car manufacturers rely on fools or companies to buy every few years to survive.
If you can write it off as a business expense lease whatever car you want If you work a regular job where you’re using your earned income just buy a reliable car and pay it off as fast as possible. get rid of the payment and keep it for as long as possible. now you have that money coming back into your pocket that you can use elsewhere. Don’t get stuck in the perpetual car payment cycle like 99% of people
Company cars are a great way to go. Currently have a ID.3 for £500/year (including insurance). Granted only 5k miles but we also have personal lease to balance out the miles
At 27 I've already financed 2 cars. In first instant I bought a Scirocco 9 month old Scirocco £15700. I paid a £5700 deposit, and secured a £10 000 loan from the bank at 3.4% interest. I paid £181 a month for 5 years. Sold the car for £9100. If you minus how much I paid for the car 16560 (including interest) with how much I sold it for, the cost of ownership was £7460. So essentially it costed me £126 a month for the car, which was peanuts. This time round I got a VW Golf brand new for £32800. Paid £7k deposit and financed the rest through Hire Purchase at 8.4%. I'm this time paying £567 a month for 5 years. So realistically if the cost of ownership for the vehicle is to be anywhere near my first car. I'd have to sell the Golf in a few years at around £32k, which would be impossible. I'm most likely gonna be looking at £12k. So the cost of ownership would be still £500 odd a month. So yeah moral of the story don't buy a brand new car, in most cases leasing new would out cheaper, as my case it was possible to lease the same car for £440 a month albeit for 48 months rather than 60 months
One thing you maybe missed is regarding the pcp purchase option.. when you start it they give you a guaranteed value at the end of your term.. given the used car market at the moment you could be better off paying the final balloon payment and then selling at its (potential) higher market value giving you some extra money - albeit minus the interest you’ve been charged over the years!
Only buy used cars that have taken the depreciation unless you really really like a certain car that's special. I bought a used BMW and it's been amazing, it was worth about half of what it was new. You only lease if you know for certain you want to keep driving new cars and you have a steady income.
At this early stage of electric vehicles it makes more sense to lease and give it back because every year they add more range and charge faster. Some models even get cheaper. Aside from that if you want to own just buy a pre-owned car that is preferably certified and let the original owner take the depreciation hit. Great insights.
Lease car, you never own it, can't mod it, have limited miles and they will go over with fine tooth comb when you hand it back and charge you for every mile over or scratch! Buy the car, you do own it. Can do what you want with it, no penalties if you ding it, no mileage restrictions, And after 3 years you still own it and its has residual value, which you have not mentioned at all!
Buy appreciating assets and rent the depreciating ones. If you have a spare £50k then lease your car and use the cash to invest elsewhere. The other assets will cover the costs of your car, and more.
So let me get this straight…use your spare £50k to buy into e.g. a property yielding 4% annually…but lease and pay say 9% interest to have a car…makes sense.
I’m old enough to have leased cars, bought cars outright, got shafted on tax in company cars . At the end of having experienced every possible scenario I now prefer spending about £16k on something a few years old that I own outright. Something at the bottom of their depreciation, not worried about getting charged £100 for each light scratch when it’s leased or worried about future value or worried about having to find more money at the end of the lease. Currently in a nice 640i coupe 2014 which will suit me for a while. I also don’t feel that I need to keep up with other commuters by leasing that 1.4 Audi on 20 inch wheels that’s a more expensive payment than their mortgage. I bought my 640 using dividends from my savings made up over the years by not leasing or having monthly car payments.
good video. the maths on future trade in value is a bit difficult to predict. additionally if you buy a 5-8 year old car, the depreciation won’t be as big. i’ve got a bmw e92 3 series which i’ve had for 3 years and it’s not dropped that much in price since then. so i guess it depends.
Really great presentation Rory. I used to sell cars years ago and I always knew some people couldn’t afford to buy a new car. I had to compromise my integrity and left the company. Buying a new car is stupid based on how much it depreciates. Buy 3yrs used or lease new for 3yrs is my rule.
I have always bought premium 3 year old cars (BMW 3/5 series, Audi A3 etc), at 45-50% of the new car price (either as a private or independent dealer). Stick a private number plate on them and run them for 6-7 years, before selling them for 25% of their brand new list price when they are 9-10 years old. Other than regular servicing you typically only needs to replace consumable items (tyres, brake pads, belts etc) at 5/6/7 years old and that’s it. Depreciation is the most expensive element if car ownership. In my opinion continuously buying brand new cars, one after another, is the best way of burning through money.
Two other things to consider are the APR if you need a loan to buy a car (not many have a spare £30k - most would need a loan at 6 or 7% which can be a couple of thousand). Also the leases always include the road tax in the monthly which are not included in the 'buy' price in the video
@galloway9707 alot of dealers dont give as much of a discount for cash these days, but will give a bigger discount for buying on finance, (they get the finance company commision), but then i know a few people who have done this and then paid off the finance in full, which even with say 3 months early repayment penalty have saved more than buying for cash price with a discount.
@@galloway9707 Very fair point. For what it's worth I prefer to buy rather than lease. I like having the freedom of not being tied down to an expensive contract if your circumstances change and if you do manage to pay the car off, you can be hundreds up per month over the constant cycle of never ending monthly payments. We have one buy and one lease in our house and cannot wait for the lease to go back.
General rule: rent/lease depreciating assets... Leasing makes a lot of sense opposed to buying if you looking at new cars for your daily that will depreciate a lot (see EVs) and you like getting into a brand new car once the warranty runs out or every 3 years or so... You also have to consider opportunity cost of what you could be doing with that money if you were to outright buy or finance with larger monthly payments and the cost and time it would take to sell the car.
Wonder if Autotrader makes more money from leasing and financing referrals on new cars than users buying used cars ;) Would have been decent of you to include used car comparisons
I always lease, I like it because if the car is terrible I just give it back at the end and be done with it. If I like it I just finance whatever is left or pay it off and own it.
Rory, in the UK over 80% of new car sales are bought with a PCP and not outright in cash, this is possibly the comparison you should be making as this will have an impact on your comparisons. Other things to consider in your video are that a lease will include Road Tax (VED) for the duration that can be significant which you would have to pay on top of the the cash purchase for years 2 and beyond and similarly for a PCP car. Additionally if you return a car at the end of the lease you have to pay for any damage and the costs for these are set out clearly in guidance when you take the lease and can be reasonably costs effective, the flip side of that is having the unpleasant experience of part exchanging the car bought on cash or a PCP when you are finished with it where the value will be subject to the market conditions and any damage will be reflected in this valuation. In summary, as you mention there will be cases where providing a new car through either cash purchase, a PCP or Leasing each have their benefits and these need to be looked at based on the individual and their requirements. Always calculate the lifecycle costs for each car you want to compare including cost of capital, monthly payments, interest charges, road tax and future valuation to be able to compare on a like for like basis.
also if you lease a car through a work benefit scheme, which is what i'm looking at currently, this would mean for me no initial payments, it comes out before I would get taxed, (so in effect i pay less tax), it also includes, not just emissions tax, but car breakdown cover, windscreen, cover, servicing, and insurance cost. the best value for money options are the EV's, then PHEV's then hybrid then ICE options. so take for example a hyundai tuscon, i was looking at the PHEV is about £450 PCM, the hybrid option is £550 PCM the petrol and diesel options are between £550-600 PCM despite them costing alot less initially than either of the hybrid or PHEV versions.
A case: Purchase it money you have or can borrow from another source cheaper than the interest rate for the PCP. If you haven't got the cash in my book you can't afford it! So, you PCP'd, H.P.'d and got the car. The car is taxed & insured in your name. A while down the road the interest rates go up! The mortgage rate goes up! the wife gets pregnant again or loses her job! What happens? Fixed but variable loan costs. What goes first? A) you miss car payments? B) you miss mortgage payments? C) you send the car back? It's old (used now.) The price you paid included VAT (20%.) Car Tax (10%.) Well you also spec'd it? So, it will be hard to shift! So they give you a fair price? Which is Less than the loan amount Lease Termination Clause! Whoops, no car outstanding debit! Credit Score Through The FLOOR!
With cash sale you can sell the car if you ever need money for an emergency, but if you want to get out of a lease early it usually has large penalties to pay. And if you like the car and want to keep the car more than 3 years the depreciation gets much much less and you don’t have to pay anymore money, whereas you have to get yourself a new lease car and have the same expensive monthly payments. Leasing can be cheaper and suit some situations but this video doesn’t talk about the risks and penalties if you want to get out of the lease early or the large charges for driving over the agreed yearly mileage allowance.
The question is, why would anyone buy/lease a brand new car unless money was never an issue in the first place (other than just wanting the latest models)? Would be interesting to watch another video comparing leasing vs buying on a two or three year old car, and over three years and five years.
Because you have the car under the manufacturer’s warranty. Also, manufacturer’s are in the business of selling new cars….if you take their finance package look at the difference in annual percentage interest rate between a new car and approved….the difference can be huge.
Yeah, that’s why it would be interesting to see the cost comparison of leasing a used car vs buying it. I suspect in that scenario buying becomes more favourable.
@@jasonsfraseryou are talking rubbish. Do you think cars under warranty are bullet proof, but the day they go over 3 years old they explode? Paying thousands of pounds a year to always stay in warranty is absolutely stupid. Buy a separate warranty, pay for repairs as and when they are needed. Either of these would be a far cheaper option if "wanting the latest model" wasn't your motivation for leasing.
The big difference is after 3 years of lease you have no car. After 3 years if you buy the car, you have a perfectly good car and no need to drop another 40k on a new one.
This is a great financial explanation for the pros/cons of leasing. I have been wanting to drive around in something a little nicer than my normal $25K options. I don't know the exact vehicle we're looking for just yet, but I honestly don't have any problems swapping out at the end of their lease cycles. We have a daily driver, so it could be time to add our 2nd. Of course, the vid is slightly different being in socal, but still really helpful.
Depreciation curves are much more steep in the first years. If you keep your car for 4 years or more, it is much better to buy. The depreciation curve has already flattened out and the difference between buying or leasing will be much greater. I always keep my cars for 5 years. I once kept a 2013 Tesla Model S for 7 years and it only depreciated 50% of what I payed for, so it also depends a bit on the car.
I came to the comments to see if anyone mentioned this. Depreciation comes up in many conversations but no one credits the owners that intend to not sell their car. I kept my last car for 8 years. My next car will be my last 🙏🏾🙌🏾
Hmmm. Depreciation is nowhere near as bad as it has been historically. I just sold my 2013 Ford Focus ST2 via Autotrader, for exactly half of what I paid for it 10 years ago. This works out to £83 per month. Not sure I would find many leasing deals at that price.
Cars were cheaper 10 years ago as a whole.... just check the price of a new ST now.... and then check ones 3yr old with about 30k miles on.... big gap!
Leasing only (potentially) works if you intend driving a new car every 2-3 years and the deal is good or subsidised by the manufacturer / finance company.
Leasing is always cheaper than buying when you lease a car that only depreciates a few percent over the term of the lease…as long as you collect all that equity by trading it in or selling off the lease and pocketing the cash difference between the residual buy-out and the agreed trade or sale price :). Ive done that several times now :) Thank you Canadian premium performance car market!!
It depends on what manufactures specials are available as well. As stated in the video, not all vehicles will lease well. I would look at PHEV and BEV which if built in the US qualify for the $7,500.00 EV credit. Some manufactures are finding loop holes for customers to qualify for that EV credit. Here in the USA 3 months, Jeep had a lease special on a 2022 Grand Cherokee 4XE that had up $14,500.00 in rebates which included a $7,500.00 EV tax credit. The SUV MSRP was around $62,000.00 and I was able to lease it for around $419.00 a month for 39 months. As far as damage on returning your lease, manufactures offer what's called wear & tear for leases; to protect you for damage.
Cars are basically free in America, compared to the UK. Tesla M3 $28k on US site, UK equivalent is $52k for the basic M3, although I'm sure Tesla have already included the tax rebate, unavailable in the UK
I've always thought this was a really interesting question, especially when you consider high end cars with massive depreciation like luxury barges. Particularly when you think about the failure rates for all the fancy tech in something like an S-class or 7 series.
whenever there is a third party (the finance company in this case) in the equation, it can not possibly be cheaper for you, since they need to earn money as well in order to run their business and be profitable.
Strangely I lease my Tesla through a third party and it was cheaper than leasing directly from Tesla by nearly £100 per month. It all depends on how they decide what the residual value of the car will be at the end of the lease period.
Interesting idea. I think I may be missing something here... My take is : Even after depreciation, you own the car. After the lease you own nothing. Trade values are not necessarily the resale or private sale value - it's the trades' micky take that they add their 4-6k profit on top of. Leasing comes with a host of hidden extras like going over mileage or dinks and dents. The most obviously thing to do is buy a used 3year old car if you want to save money. Finally, the interest paid on loans is ridiculous. BMW offering 13.9% Apr on a used car is total madness. 40k cars end up costing in the £50ks. Sell a kidney, pay with cash...
@@aidan6557 see I don’t get that as you can spend a few hundred on a warranty extension if that’s a concern. You also have the likes of Lexus with a 10 year 100k warranty if serviced with them, Audi with a 5 year extended option, Toyota and Hyundai at 5 years and Kia at 7 as standard. I’m sure most others offer manufacturer warranty extension at a fee to.
What you said at the end was the biggest thing people need to pay attention to. You can’t mod, you have to pay for any damage and last but not least, your miles are limited! They have different levels of miles at different price points. Most people go with the 10k. This is ok if you have multiple cars in your household, but if it’s the only one you have and you’re single, nope! For us, we are in a financial position where we do a little of everything. We purchase outright, lease and buy. It just depends on the situation and car.
The way i see it, Leasing costs about the same as the depreciation. But afterward the end of the lease term, youre left with nothing or a big final payment? Whereas if you bought with cash okay its depreciated but youve still got an asset to keep or sell?
Another point in favor of leasing over buying new: We really can’t know the cars future value - it’s an estimate. Leasing locks the cost in, while buying is riskier - could turn out better or worse than expected when you trade. Of course buying used is always cheaper 😊
Leasing makes only sense if you can write it off on taxes as a company car. If you plan on keeping the car, just pay it off as soon as possible. Or bigger downpayment can’t help reduce payments. Car buying tip: don’t let them run your credit unless you really want that car and always try to negotiate. If your car salesmen said he did his best, request for the finance manager or manager. But best option is to just ask for cashier check/loan from your credit card union or bank. Car dealerships hate it but don’t mention until you got off those markups
Your math would add up if someone was leasing a car at 0%. But if you are paying 6-7% interest rate on a lease then your total cost of lease is a lot more than depreciation when buying it outright.
11:22 should've been the first thing in the video. Those are serious drawbacks that will often cost a lot of money that you didn't put into calculations. Also, with new cars, sometimes you can get a good price on a sale or through negotiations. For example, i got $25,000 discounted from my BMW M4 because dealer put too many carbon fiber bits on the car, plus a mark-up, so it didn't sell for a year and they needed to move inventory so i offered much lower value and we negotiated to a price of a regular M4, but with $25k OEM options that I got for free. Try that with a lease
Personally it doesn't matter, to look outside at an amazing car and to know inside that it's not actually yours, ruins half the experience. A car is more than a machine when it means so much to you.
Leasing is great for people for who are not bothered about owning the car at the end of the term. Also, would of been better to word things differently and take into consideration finance vs Lease. Not just buying outright. As some don't want to lease. They want to be able to own at the end but cannot afford to buy outright therfore buying via finance or even bank loan. And lease vs Finance monthly payments can vary too. My current car a 2023 GOLF GTD is on lease. It was half the deposit and £120 per month cheaper than financing it. Of course I don't own the car at the end. But half the money saved each month on payments banked over the term. Is the deposit for the next new car. And for the people who say if you can't afford to buy outright don't lease or finance. Stop! I know multi millionares who finance and lease cars. As the value of the vehicles in the bank can make more money invested elsewhere which is a growing investment with the profits covering the payments each month. Its called being smart with your money.
Rory, Rory, Rory - what are you doing? Have you sold your soul? PLEASE, stick to reviewing cars rather than pushing leasing. (1) No sane cash buyer pays RRP and the discounts available dwarf the measly saving quoted. (2) There's no upside to returning a leased vehicle with under agreed mileage, but if you exceed the agreed mileage then you'll be heavily penalised. (3) If you return a leased vehicle with minor "wear & tear"-type damage, again, you'll be heavily penalised. (4) You can't exit a lease early, so you're stuck with the car (and the payments) unless you pay handsomely for the privilege of an early exit.
Yup, as others have suggested, the wisest choice by FAR is buying a slightly used vehicle. That being said, there are cases where leasing is better. About a decade ago I moved to a region that has harsh winters and terrible road maintenance/infrastructure. In the first 8 years I purchased two used vehicles, both under 5 years old each, both were completely obliterated by the environment, maintenance costs were through the roof as neither had a warrantee, and resale values were a complete joke. Looking over the math, I was shocked to find I was spending much more than a lease payments worth of cash on a car that that was slowly becoming unsafe to drive. I bit the bullet and leased a new car, saved some money (on average over time), and had the peace of mind of a warrantee. Returned the car at the end of the lease period, easy peasy. Would I do this in a region where the weather was milder and the local gov't was less corrupt (ie: maintains the roads)? Heck no. But there are cases where it's better to lease.
Interesting video, however the cheapest financial option in this scenario is to buy a nearly new car in cash, you get a modern car and the worst is of the depreciation has already occurred
@@galloway9707 if buying new, it’s almost always better to finance or lease when the interest rates are low. The opportunity cost that you lose when paying with your savings is the difference between what you could have invested the cash in, other than the car. If you took your 40k and put it in an investment account that returns 10% and you’re only paying 3% in financing or lease interest, then you’re ahead. If you’re buying a 3 year old car, as an example, then yes, this is the best option as a huge part of the depreciation is typically within those first 3-4 years. But you will be out of warranty in some cases, so you have to factor that in as well.
The other big part is if paying for the new car needs a loan to pay for the car, then there will also be a substantial cost of interest. I leased my last car and included maintenance. For me this was much cheaper with that particular car, than the equivalent PCP.
I bought a white 2007 BMW 325i M-Sport convertible in beautiful condition 3 years ago for under £5k with full red leather interior - that means no depreciation as we have been offered the same for the car 3 years on and it's a wonderful thing. I call that a win!
Fascinating video, Rory, depreciation is the key measure of how much a car really costs to run. You said that the depreciation value is the amount that you could sell the car for privately, but the value on the screen is quoted as the "Future Trade Value". These are different, and by up to one-two thousand pounds, a trade-in will be worth less, very few people want the hassle, risk and cash flow/management issues of trying to sell an expensive car themselves and so this is important to state. Similarly damage. I cant imagine too many people looking after a lease car to avoid extra loss on return due to damage. Well done, a classy talk to camera. I enjoyed every minute. Thanks. Never bought a car on the never never and I think I never, never will. Bonkers choice of cars, who can afford those prices other than through a business? Happily my ego doesn't require me to spend £5-10K year to keep up with the neighbours. I just drive a reliable tin box that gets me from A to B.
This might work if you want a new car every 3 or 4 years, like businesses that don't want their sales team driving around in old bangers. For nearly everyone else, buy the cars when they go off to auction at the end of the lease so the first owner takes the big hit on depreciation. Vanity comes with a big price tag. I bought my car when it was 10 months old, like new with less than 3000 miles on the clock. Paid about 65% of list.
What’s ignored is once you have a car paid off via loan ending or just buying in cash that monthly you’ve been paying just goes straight to your bank account. Where as leasing, you'll never stop paying if you keep doing it and you don't even keep the car. Which is fine if you want to get to experience a ton of cars.
Great information! Leasing is also great to get these rebates for EVs. I enjoy a new car every few years without taking a hit for depreciation. I rent cars if I am going on a road trip. But those who wish to drive their own car on frequent road trips may want to buy.
yess thank you for this! My family calls me crazy for recommending some people to look at leasing. Their arguement is always one of the following two: - you don't own the car - leasing is only for people who can't buy new cars. You should always buy and pay the full price
A couple of points, the owner is responsible for paying the road tax so saving even more, and EV's are plummeting in value so can be a good lease deal, the Ora funky cat on private lease is £181 per month with £2230 deposit, but worth less than half its list value of £32000 after 2 years and an MG ZS EV with a list price of £32000 is worth only £12000 after 3 years
A lot of variables in the comparisons - mileage allowances restricted via leasing, warranty via buying, how was the depreciation valued considering mileage and history? Worry of minor damage being overly expensive when giving the car back, interest earned elsewhere if car isnt bought. Im really torn which route to go down!
I bought a new car (MAZDA6) with every intention of keeping it for 10 years + My yearly mileage of 6.5k means at 10 it will have done 70k. I worked out from year 6 to 10 or 2nd/3rd car purchase is where I'm really saving. It will soon be 5 years old and still 100% reliable.
I always buy my cars 3-4 years old with low milage for a lot cheaper. Just bought a £70k Audi TTRS Roadster for £42k with 12.5k miles on the clock. It looks and drives like new.
I would recommend that you add the following to be thorough in your analysis: (1) if you purchase a car for $50,000, you pay sales tax of 7% = $3500, whereas if you lease and the depreciation over 3 years is 40%, you only pay sales tax on $20,000 = $1,400 (a saving of $2100); and (2) if you lease, you will likely have to pay a variety of "acquisition fee" and "document prep fee", which you might not have to pay if you purchase the car.
Buy your cars in your younger years.. starting with buying used that has depreciated. And then Lease in your older years.. when you have less use of the car in question. The peace of mind and variety will add to your years.
A great video with valuable insights, especially for a novice/amateur to the purchase/lease scene. I've been watching many clips on this and it really is situation contingent, so that magnifies the need to do research and to calculate ones needs/desires and costs pertaining to the vehicle under contention.
You forgot to mention the lease company charge you for every stone chip and supermarket ding on the car when you return it, also if your circumstances change and you need to do more miles the car could end up sat on your drive and you need another car leasing is for companies not individuals, in years to come the lease companies will be sued for miss selling I think, watch this space for that.
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My takeaway from this video is that the rational path is to just buy a used 3 year old car.
Three years old is still pretty new, but some other sucker will have already suffered the majority of the car's depreciation.
Exactly what I did, 3 year old Toyota with 2 years warranty remaining. Looks & drives like a new car. Service it with Toyota & warranty extends to 10 years. No brainier in my opinion.
Pretty much nailed it! You can go even further and extend the car's age from 3 to 5, and it will still be a safe bet and much cheaper.
Yep. I bought a current shape CLS for half the price the guy before me paid brand new 3 years old.. crazy depreciation and a lovely car to own
You are very wise...and don't forget, you should drive it until it's wheel's come off. It will have more than paid itself (:)
At the start of the video Rory makes clear that this is about new cars, though. It can be more economical if you, for some reason, always want to buy a new car, and periodically want to change your car.
Just buy a 5 year old car for which other people have taken the depreciation hit.
Or even just 18mths old. I tend to do that and keep it until it is about 10/11yrs old.
And take it to a first rate certified mechanic. That is what I did for my 928 and 968. Spent a few thousand having the heads removed, thoroughly flushed, new radiator, etc. Replaced the hideously expensive titanium exhaust with stainless steel, new struts shocks & bushings, change the tranny & diff fluid, new brake pads & a thorough cleaning. Both were like new cars & still 10's of thousands less than new.
And I didn't feel guilty beating on them.
For most people this would be a far more sensible thing to do!
100 pcent
In aug 2015 I bought a 2010 bmw 320d 121k on clock for 6k. Its now worth atleast 1500. Repairs in the 8yrs iv had it....about £550. Plus maintenance tires, service etc. I know th videos about buying new..but used does make financial sense in across th whole range of car models.
On the other hand my 2015 cayman went up in price lool (well for a short while, covid etc and then maintained that high price for a while, didn't cash in though).
Finding a good reliable used car makes alot of sense if trying to maximise your money.
And like th above said....try finding a good mechanic!!
Great video Rory. Just a couple of things to consider: when handing back your lease car the company often find reasons to charge extra for ‘damage’ (ie small scratches on the body/wheels etc) and if you buy the car, you have ultimate flexibility to sell wherever you please. If you lease you are kind of stuck in a long term contract with significant penalties to exit.
You get charged for damage when you sell your car. Lease companies in the UK use BVRLA standards for fair return conditions. No one gets ripped off for fair wear and tear.
@@bencocker7487 I must have dreamt it then!
@@_bav or you had damaged a car and had to pay for it to be repaired, just like if you were to sell or px... Scratches don't grow over time, they are caused by neglect.
@@bencocker7487 Or, perhaps, your absolute conviction that all lease companies play by the all rules all of the time is not reflected in reality.
@@_bav so when you damage a car you expect the next owner to have to pay for it? Sounds great 👍
I had 2 car finances and owned 4 cars in space of 5 years.
I have learned that I have always lost cash on finance. On my second finance, I had to pay £1100 to get the finance cleared due to high %, depreciation, and inflation...
The best option is, buy a 1 or 2 year old car when it's still new, had already lost 20-30% of it's value and either get a low % loan via bank, 50/50 bank loan own savings or buy outright with your own money.
if you need other peoples money to buy a car, don’t.
@MbeezySheesh unless you borrow from your dad interest free. That's what I did
Also worth mentioning 2nd hand car market is extremely strong right now, I bought a 2016 340i which at the time 3y old for under 20k, traded in this year after 4y of ownership and got 18.5k, essentially lost only 1.5k in 4 years. You can't even lease an electric pushbike for that 😂
@@johnjackson2349 Sounds great initially. But try going out now and buying a 3 year old 340i. You’ll pay way more than you did 4 years ago! It’s the ‘cost of change’ that matters, otherwise you’re not comparing apples with apples.
@@MbeezySheeshif everyone followed this advice there'd be no used cars to buy, someone has got to take that hit buying new and very few people can afford to pay outright for the average price of a new car
Two different aspects that weren’t mentioned.
1. The figures were based on buying at full retail, any discount negotiated at point of purchase can be subtracted from the overall cost of buying to selling.
2. For someone who physically has the cash to buy, the interest they could gain leaving the money invested and leasing instead, can be deducted from overall cost of a lease.
💯
also if you buy, you have an asset (albeit depreciatng) and can sell if required, and when you do sell you can use that as a deposit for your next purchase. If you lease, you are in a contract to pay that amount (what happens if you lose your job? an penalties fore returning early?) also what do you use as the deposit for your next lease?
Polestar 2 is worth £21,823 after 3 years, however the cheapest 2020 I could find in the country was £26k and that one has 76k on the clock the next cheapest is over 27k.... Worth mentioning if you but a 'new' car the longer you have it the less you loose per year, for example if a car looses half its value after 3 years it doesn't loose the other half after another 3years, it still will have significant value not zero meaning the monthly loss is less the longer you own it
Initially thought the same thing, but if the conversation is about selling it back to dealer then the figure lines up. Dealer is selling my wife's Up! for 3k more than they took it for on PX at the end of her PCP, so 4k on a Polestar 2 would seem about right.
@@96cyt Exactly.. It is how much you can get from a dealer.. not how much you see on the market.. by saying that, unfortunately, in general ,people buys the cars from dealer .. not from private sellers... I couldn't sold my Passat even If I asked %15 percent lower than a comparable car at the dealer... .. gave up and sold to dealer for even les..
Yeah, if you're the type of person to change/upgrade your car every year or two leasing makes sense, but if you plan to have the car for more like 5-10 years it doesn't make sense. That style of ownership is more realistic nowadays imo, the tech differences year to year aren't as drastic as they've been now that we have bluetooth and carplay with cars having computers that get updated inside. I'd bet the stat from this video of people changing cars every 3.5 years is heavily inflated by the subset of people who change their cars every year and/or own multiple vehicles and the median is at least more like 4 years.
EVs just depreciate a lot more the older it is because everyone thinks the battery is degraded which they do about 2-3% per year and replacing it cost about 20k for Teslas in example. Demand is there but range anxiety and poor performance makes most people go back to ICE or hybrid . The direct sales model helps most electric car companies compete with the ones like BMV, Audi, GM, etc.
@@henrylam92 In addition to that, new Evs are charging faster and even the auxiliary systems are getting improved even If the battery technology and capacities stays same .... thats also a concern (well lets say should) for an EV buyer.. no one wants a slow charging car.. new EVs are getting better and better about this (and will be better) ..
I'm on my fourth lease car. The trick is to be open minded in the model you lease, dont use main dealers. I always go for cars on a deal. I've had an A4 £180/month 6 month deposit 2 year lease, A5 £220/month 6 month deposit 2 year lease, Arteon £270/month 6 month deposit 2 year lease and currently have an A6. I've never had to pay additional costs at the lease end. Treat the car as if you own it and look after it well. Wash/wax and valet before return, by myself. Also, I've been given the option to purchase each car at the deal end.
Also, the savings are higher than stated in the video. Road tax and breakdown is included in the monthly lease, wheras these would be an additional cost of ownership.
Thanks so much for explaining it explicitly. Where can I look for to get cars on deals please?
Which lease companies?
Where do you get those deals from?
“You'll own nothing and you'll be happy”
I must be too poor. I don’t know a single person who changes cars every 3-4 years. People around me changes cars every 10 - 12 years.
Not me, but my dad's old coworker used to change vehicles every 3 years. Granted, she was a widow and didn't have children
@@akilh340 Did they die in the car crashes?
I think you are right, you must be!
American like to replace cars every 2 years. That is why you see a lot of American cars quality only good for a shirt time.
@@merrichoang6858 your analogy is flawed. In Vietnam we have decade and 1/2 old Dodge Challengers and it still running on our roads. And old Mercedes platform actually helped it reliability wise.
Don't forget the cost of credit. Nobody drops £45k on a new car without borrowing, usually from the dealer on a HP or PCP product . Interest rates at the moment are often double digits so the cost of borrowing needs to be factored in too.
Technically the "nobody drops £45k on a new car without borrowing" part isn't true.
Mostly true, but technically not 😄
@@ApothecaryTerrytrue! I just dropped 45t€ on a used car and borrowed no money at all. Interest cost doesn’t bother me at all.
I drop over £100K on a brand new car and each of my car should last over 10 years. I don’t like to pay interest.
@@markus8484 you could still calculate the opportunity cost.
If you invested the extra money left over from the lease in indexes like S&P 500, you'd get an average of 7% per year. let's say 7% of 35k for one year, 7% of 25k over the 2nd year and 7% of 20k over the third year. There are more than 4000 pounds in there.
@@dariusdareme yeah I know but nobody guarantees you the 7% profit. It can go down really fast and you have no profit at all or maybe a lost. I do investin stock market or etf as well but I never calculate with the profit. Furthermore you may gain the 7% but mostly on a long run. If you put 25k now in the (currently high) market and only a small decline of the economy or a war somewhere and you need years to get your 25k back.
Good video that shows benefits of lease. As a sales manager in the trade myself it would be good to do a comparison of lease against PCP to show the differences as they can be very similar in monthly payments but with some very significant differences in consumer rights and ownership. Also with interest rates now rising the 'cash conversion' angle is more valid.
Another bonus of leasing vs pcp on your credit file is the amount owed on your credit file is just your remaining monthly payments added up. Pcp is your payments plus your ballon and plus interest so is a lot more debt for the same car and can hinder more borrowing.
Whoever did the editing for this video did a really great job! Loved the small details and effects with the camera movements and words
Yes amazing achievement - nobody else on the internet can edit.
The comment that summarizes everything. Great video
Went for a lease through work for an EV, was considering a polestar 2, but could get something more premium for the same monthly cost (it also comes with insurance/servicing). But thank you for making the video
Couple of things. Pre reg cars or a car that’s 3-6 months old so nearly new completely changes the equations as it takes out some of the depreciation. You also have to factor in the expensive of any damage to the car that’ll change the end value you’ve agreed or throw up extra charges at the end or a lease. Either way people should do whatever they prefer and makes sense for them
I have done well over the last 15 years…two used Passat models recently replaced with a newer model but close to the end of the model run so lots of extra kit…leather, sat nav, heated seats etc…then keep for 9yrs. Much much cheaper than the most expensive way to have a car - buy new and sell it just as most of the depreciation has happened. 😳
Or just get the bus.❤❤
The question is why would anyone sell his car after 3 to 6 months. It should be faulty
What you’ve not mentioned in the purchase options is the fact that many people won’t have the cash up front and will need a loan to buy a new car outright. So if you add the interest costs to the car price this makes leasing even more attractive in many cases.
This. I don't have the money and never even thought about leasing.
Hang on to your old car, take the money you would have paid on a lease into a savings account, and in 3 or 4 years you will have enough to buy a car outright, and a car that you can then keep for years and years, instead of having to do the whole thing again when the lease ends.
@@brendanpells912 what if someone wanted to lease the most unreliable car because they love is too much?
At the end of the term if you’re circumstances have changed and you had bought the car outright you still have a car to drive around in, whilst you still have only lost pretty much the same as if you leased it. I guess if you’re self employed that at least some of the costs can be offset against your tax. If you own the vehicle you also won’t have any nasty surprises after 3 years had you damaged anything before handing it back on our shocking roads.
Actual resell prices of those cars after 3 years and less than 60.000 km is WAY above the what you said
Rory, a couple of things not discussed:
1. Opportunity cost. If you lease a car, you can then invest the capital you would have used to buy it outright. Because there's an almost infinite number of investments one can make, it might be hard to give a fair explanation of what the potential return might be, but at least its worth TRYING to cover this in the discussion.
2. What are the limitations with leasing. For example, I live in Surrey and want to drive on the continent a few times a year. Can I do that in a leased car? Are there any concerns / considerations etc?
it comes down to how long you plan to hold on to the car. If you only plan to keep it for 3 years before selling, your generally better off leasing. But if you hold it longer, 5+ years, buying using makes more sense
And this only applies to new-new cars. Get it 3-5 years old & if you're worried spend the equivalent depreciation cost from it being new on various warranties, that makes the most sense. New cars are a rich folk game.
@@R03333 yes definitely
You're not better off leasing if you do 15k-20k miles a year, regardless of how long the term is.
5+ years, you're then looking at major services.
Problem is that those depreciation numbers are likely WAY too high based on pre-pandemic market...
True, we're living in a different market at the moment
@@VarioFelceDealers are suggesting prices are softening considerably at the moment. However, high rates and absurd new car prices will hold used car prices up higher than pre pandemic.
Yep. The Porsche 911 will no way deprecate so much.
maybe, but not for EVs, their values have plummeted
@@eddthirty4065 Not tesla's, they're stilling holding up well and they are 80%+ of EVs...dumb comment
I wouldn't do either nowadays as everything has an inflated price.
It all depends on personal preference, what type of vehicles you like and how much spare money you've got.
If you want a almost new car buy pre registered. Car dealers do this to hit purchase targets from the manufacturer. This way don't get hit by the initial depreciation and it's cheaper than leasing. I personally saved £5k on a Skoda Kodiaq in 2018.
Buy a banger, drive it till it dies then buy another, my £800 car has been running fine for 5 years now
This is the way
Biggest factor you missed is our keep with the Jones' mentality is that the fact that every car is a money pit, waste of valuable cash. Anyone with half a brain would want to buy a cheaper no nonsense a-b car and invest the hard earned income into property or ISA's for a fantastic cash rich future, private education for the kids & most important, a more prosperous future. Why would anyone want to spend silly money on a car instead of investing for a better more comfortable future is beyond me, Great vid as always Rory 😊
Because V8 big turbo vroom vroom gang gang eskeeeeeetiiiit.
@@paulklp8262😂😂😂😂 Send the Kidz to an Academy get them a stab proof vest & buy a Hillclimb car 😅
@@paulklp8262 😂😂😂😂
Because its nice to not have to worry as much about getting to a destination without breaking down or being uncomfortable
Cars are a passion and a hobby.
Of course they cost much money and degrade very fast but as long as it makes you happy, it's well invested money.
I love my car very much and LOVE to drive it every single time. Driving bus would make me crazy and no comfort while driving would do so too
I think some manufacturers offer flexible lease schemes as well. Basically what Rory talked about but at the end of the leasing duration you're given a choice to buy the car off the manufacturer if you want. And that's just a tip of the iceberg.
It’s called PCP
@kinocchio no, I had my BMW on contract hire with BMW FS and they let me settle it at the end then trade took the equity out selling it to a dealer
@@bloodstockvip2176 Did you check your settle value against the market price for the same vehicle? Iirc those 'buyout' options on leases are only offered when the automaker/dealer is going to take a lose on the lease (because the vehicle depreciated more than expected, so there is a difference between what you paid (for the lease) and what the vehicle is now worth.
@@logicalChimp I took 4k equity out of it at that time, long time ago now had my current car 2 years
The best advice I got was this. Lease Germans, Italian, and British. Now buy Toyota, Honda, Subura and Mazda. When buying. Save as much for the deposit, then go to your bank get a loan. Which you then pay of the loan. Which depending on how long you have been with and how much you earn, will affect the rates. Also it can help build your credit and help with other financial things.
Not finance advice. Just something I have been told and seen upfront.
It's much better, as you can also get a lot of savings if you pay the car in cash. A friend of mine got €3K off a new Skoda Octavia. The interest rate of the loan was around 500 higher, which meant he saved 2.5K this way. Another thing to add is that if you get sacked, you can just put your car for sale, and pay out your loan. I've heard from car dealers that used car buyers don't fancy paying for leased cars.
No such thing as a British car
One vital thing thats forgotten here is that once your lease is up you have to put down another initial payment on a new lease for a new car. once you do that you would be paying more to lease in the long run then just flat out buying a car. And this doesn't even factor in the Fee's companies will throw at you once you return the car.
The initial payment is included in the calculations for the total cost of the lease.
The “initial payment” is really just pre-paying for depreciation. Your deposit lowers your monthly because of this. It’s not an “extra fee” on top of the lease, it factors directly into your lease payments.
Great video… a few other factors… 1) interest rates on both options 2) when you lease, if you have an accident claim, you can return at end of lease and decrease in value because of the claim is the dealers issue versus your impact on depreciation if you purchased and decided to resell (I.e., projected depreciation at the start will be greater as people expect to pay much less if there is a claim) 3) with technology advances happening much faster in cars, if the vehicle you leased has some major refreshes you can just get the newest version instead of being stuck with the old technology 4) EV depreciation is still a wildcard so leasing protects you from major swings like the recent Tesla price decrease 5) you get to “try it out” with a lease and still buy at the end if you liked it or dump it if you did not.. bottom line is buying used is the most prudent approach from a financial perspective but for a car enthusiast, leasing allows you to explore more often with the major downside being stuck in a contract that can be tough to get out of if your financial situation has a major change (loss of job etc.,)
was thinking same thing. This analysis tries to boil it down to just the obvious key differences in price, and then proceeds to completely miss a massive part of the equation, which is the lost interest from you sinking £40k into a car when buying it vs leasing. Most leases are the same or very similar total payments if you go 12+23 or 1+23. So the best thing is to go 1+23. Stick your £40k in the bank, and you are earning £2k a year on it. That's a £6k bonus to the lease option that is completely ignored. Very strange.
The only difference between leased and buying the car outright, is whether you choose to pay for the depreciation in a lump sum when you sell it, or in instalments. It’s as simple as that.
Yep. Although you usually find interest rates on leases are slightly higher than financing, but not always.
So what did we learn today ? Don’t buy new cars
Wrong, means you didn't pay attention.
Each car depreciation is different.
A cheap civic for example. Is bad to lease. You would lose more
But if you lease a high end supercar that's rare they appreciate actually. So it's better to buy, then flip sell it.
It's called math buddy
@@VirtousStoic lol you may know math but you completely lack the ability to read. Read what he wrote again then take your bias out of what he said
Yup. Gotta be a mug to buy/lease a new car unless you literally have more money than you know what to do with. And modern cars are a total yawn fest anyway.
@@VirtousStoic does somebody know what math is cause I don’t I’m to stupid to read
You can buy new car. Just work hard
Who remembers the good old days back in 2015 when you could lease a Golf R for £200 a month? Ah…memories. Long gone now
Bidenomics at work
@@usapanda7303 Trussenomics at work. Biden not our PM
@@usapanda7303 huh? Obama was US president in 2015, Biden was the VP. Neil Wolin was the Secretary of the Treasury.
I don't understand what you mean, currently Biden is President with staggering inflation... What does Obama have to do with it? @@eddthirty4065
Leasing is LITERALLY cheaper. Like the monthly amount difference could be almost $500 less for a luxury Car. This is for people who will always keep having a New car around, some people hate old cars.
Given examples like the Polestar. Still always prefer the finance option. Gives you the option to keep it. That next 3 years of ownership is when the depreciation settles down and the car is still very 'young' at £24k miles. So you get to enjoy the benefit of your hard earned payments in the first 3 years.
Yes, you still have to refinance the balance or pay outright. But after 6 years that Polestar will still be worth £10-14k and you own the lot. Meaning the total cost of ownership (excluding bills) is £31-35k rather than £45k.
Leasing genuinely only suits someone that always changes their car every 2-3 years.
This is a great video, but as you mentioned it is specifically for new cars. I think buying a used car 3-4 years of age is what a lot of people would do (due to the significant depreciation as you mentioned).
I'm not sure if you can lease cars of that age/mileage, but if you were to carry out the same assessment would the result be to buy the car?
It's mostly a case of doing the same math... look at the purchase price, try to figger out the likely sale price - and that lets you calculate the likely depreciation in value. Compare that depreciation value against the total cost of the lease, to see which approach is better. The biggest risk is in trying to 'guess' the future relase value in order to work out the depreciation.
Buy 5 year old used from main dealer low mileage 1 owner with 2 year warranty with guaranteed mileage and full hpi checks done.
Keep until it falls to pieces 15 years later.
Leasing is for mugs with more money than sense that think they are big hitters on 40 grand a year.
The car manufacturers rely on fools or companies to buy every few years to survive.
Nice Rory, I was just trying to explain these cases to a friend of mine yesterday. In addition, i believe only collectible cars should be financed.
If you can write it off as a business expense lease whatever car you want
If you work a regular job where you’re using your earned income just buy a reliable car and pay it off as fast as possible. get rid of the payment and keep it for as long as possible. now you have that money coming back into your pocket that you can use elsewhere.
Don’t get stuck in the perpetual car payment cycle like 99% of people
Company cars are a great way to go. Currently have a ID.3 for £500/year (including insurance). Granted only 5k miles but we also have personal lease to balance out the miles
At 27 I've already financed 2 cars. In first instant I bought a Scirocco 9 month old Scirocco £15700. I paid a £5700 deposit, and secured a £10 000 loan from the bank at 3.4% interest. I paid £181 a month for 5 years. Sold the car for £9100. If you minus how much I paid for the car 16560 (including interest) with how much I sold it for, the cost of ownership was £7460. So essentially it costed me £126 a month for the car, which was peanuts.
This time round I got a VW Golf brand new for £32800. Paid £7k deposit and financed the rest through Hire Purchase at 8.4%. I'm this time paying £567 a month for 5 years. So realistically if the cost of ownership for the vehicle is to be anywhere near my first car. I'd have to sell the Golf in a few years at around £32k, which would be impossible. I'm most likely gonna be looking at £12k. So the cost of ownership would be still £500 odd a month. So yeah moral of the story don't buy a brand new car, in most cases leasing new would out cheaper, as my case it was possible to lease the same car for £440 a month albeit for 48 months rather than 60 months
One thing you maybe missed is regarding the pcp purchase option.. when you start it they give you a guaranteed value at the end of your term.. given the used car market at the moment you could be better off paying the final balloon payment and then selling at its (potential) higher market value giving you some extra money - albeit minus the interest you’ve been charged over the years!
Only buy used cars that have taken the depreciation unless you really really like a certain car that's special. I bought a used BMW and it's been amazing, it was worth about half of what it was new. You only lease if you know for certain you want to keep driving new cars and you have a steady income.
At this early stage of electric vehicles it makes more sense to lease and give it back because every year they add more range and charge faster. Some models even get cheaper. Aside from that if you want to own just buy a pre-owned car that is preferably certified and let the original owner take the depreciation hit. Great insights.
Lease car, you never own it, can't mod it, have limited miles and they will go over with fine tooth comb when you hand it back and charge you for every mile over or scratch!
Buy the car, you do own it. Can do what you want with it, no penalties if you ding it, no mileage restrictions, And after 3 years you still own it and its has residual value, which you have not mentioned at all!
Buy appreciating assets and rent the depreciating ones. If you have a spare £50k then lease your car and use the cash to invest elsewhere. The other assets will cover the costs of your car, and more.
That's the ideal but lease rates are so high you'll need to guarantee solid returns for that to be the case
@@R03333 no matter what the market is like there is always something better to put your cash into than a new car
So let me get this straight…use your spare £50k to buy into e.g. a property yielding 4% annually…but lease and pay say 9% interest to have a car…makes sense.
I’m old enough to have leased cars, bought cars outright, got shafted on tax in company cars . At the end of having experienced every possible scenario I now prefer spending about £16k on something a few years old that I own outright. Something at the bottom of their depreciation, not worried about getting charged £100 for each light scratch when it’s leased or worried about future value or worried about having to find more money at the end of the lease. Currently in a nice 640i coupe 2014 which will suit me for a while. I also don’t feel that I need to keep up with other commuters by leasing that 1.4 Audi on 20 inch wheels that’s a more expensive payment than their mortgage. I bought my 640 using dividends from my savings made up over the years by not leasing or having monthly car payments.
good video. the maths on future trade in value is a bit difficult to predict. additionally if you buy a 5-8 year old car, the depreciation won’t be as big. i’ve got a bmw e92 3 series which i’ve had for 3 years and it’s not dropped that much in price since then. so i guess it depends.
Really great presentation Rory. I used to sell cars years ago and I always knew some people couldn’t afford to buy a new car. I had to compromise my integrity and left the company. Buying a new car is stupid based on how much it depreciates. Buy 3yrs used or lease new for 3yrs is my rule.
Some great advice. My 17 year old clio sport 182 lost £500 in 17 years, so glad I didn't lease 😂
I have always bought premium 3 year old cars (BMW 3/5 series, Audi A3 etc), at 45-50% of the new car price (either as a private or independent dealer). Stick a private number plate on them and run them for 6-7 years, before selling them for 25% of their brand new list price when they are 9-10 years old.
Other than regular servicing you typically only needs to replace consumable items (tyres, brake pads, belts etc) at 5/6/7 years old and that’s it.
Depreciation is the most expensive element if car ownership.
In my opinion continuously buying brand new cars, one after another, is the best way of burning through money.
Two other things to consider are the APR if you need a loan to buy a car (not many have a spare £30k - most would need a loan at 6 or 7% which can be a couple of thousand). Also the leases always include the road tax in the monthly which are not included in the 'buy' price in the video
But he assumes people buy a new car at list price. Most get.thousands off this. This is biased analysis in favour of leasing.
@galloway9707 alot of dealers dont give as much of a discount for cash these days, but will give a bigger discount for buying on finance, (they get the finance company commision), but then i know a few people who have done this and then paid off the finance in full, which even with say 3 months early repayment penalty have saved more than buying for cash price with a discount.
@@barnoslogik agreed and have done this myself, but still many give discounts. Carwow is full of them, unless the model is brand new.
@@galloway9707 Very fair point. For what it's worth I prefer to buy rather than lease. I like having the freedom of not being tied down to an expensive contract if your circumstances change and if you do manage to pay the car off, you can be hundreds up per month over the constant cycle of never ending monthly payments. We have one buy and one lease in our house and cannot wait for the lease to go back.
@@paul_sam84 agree I think often the cheapest is buying a nearly new car, but of course you need to have the money upfront for that.
General rule: rent/lease depreciating assets... Leasing makes a lot of sense opposed to buying if you looking at new cars for your daily that will depreciate a lot (see EVs) and you like getting into a brand new car once the warranty runs out or every 3 years or so... You also have to consider opportunity cost of what you could be doing with that money if you were to outright buy or finance with larger monthly payments and the cost and time it would take to sell the car.
Wonder if Autotrader makes more money from leasing and financing referrals on new cars than users buying used cars ;) Would have been decent of you to include used car comparisons
I always lease, I like it because if the car is terrible I just give it back at the end and be done with it. If I like it I just finance whatever is left or pay it off and own it.
Rory, in the UK over 80% of new car sales are bought with a PCP and not outright in cash, this is possibly the comparison you should be making as this will have an impact on your comparisons. Other things to consider in your video are that a lease will include Road Tax (VED) for the duration that can be significant which you would have to pay on top of the the cash purchase for years 2 and beyond and similarly for a PCP car. Additionally if you return a car at the end of the lease you have to pay for any damage and the costs for these are set out clearly in guidance when you take the lease and can be reasonably costs effective, the flip side of that is having the unpleasant experience of part exchanging the car bought on cash or a PCP when you are finished with it where the value will be subject to the market conditions and any damage will be reflected in this valuation. In summary, as you mention there will be cases where providing a new car through either cash purchase, a PCP or Leasing each have their benefits and these need to be looked at based on the individual and their requirements. Always calculate the lifecycle costs for each car you want to compare including cost of capital, monthly payments, interest charges, road tax and future valuation to be able to compare on a like for like basis.
also if you lease a car through a work benefit scheme, which is what i'm looking at currently, this would mean for me
no initial payments, it comes out before I would get taxed, (so in effect i pay less tax), it also includes, not just emissions tax, but car breakdown cover, windscreen, cover, servicing, and insurance cost. the best value for money options are the EV's, then PHEV's then hybrid then ICE options. so take for example a hyundai tuscon, i was looking at the PHEV is about £450 PCM, the hybrid option is £550 PCM the petrol and diesel options are between £550-600 PCM despite them costing alot less initially than either of the hybrid or PHEV versions.
A case: Purchase it money you have or can borrow from another source cheaper than the interest rate for the PCP. If you haven't got the cash in my book you can't afford it! So, you PCP'd, H.P.'d and got the car. The car is taxed & insured in your name. A while down the road the interest rates go up! The mortgage rate goes up! the wife gets pregnant again or loses her job! What happens? Fixed but variable loan costs. What goes first? A) you miss car payments? B) you miss mortgage payments? C) you send the car back? It's old (used now.) The price you paid included VAT (20%.) Car Tax (10%.) Well you also spec'd it? So, it will be hard to shift! So they give you a fair price? Which is Less than the loan amount Lease Termination Clause! Whoops, no car outstanding debit! Credit Score Through The FLOOR!
With cash sale you can sell the car if you ever need money for an emergency, but if you want to get out of a lease early it usually has large penalties to pay. And if you like the car and want to keep the car more than 3 years the depreciation gets much much less and you don’t have to pay anymore money, whereas you have to get yourself a new lease car and have the same expensive monthly payments. Leasing can be cheaper and suit some situations but this video doesn’t talk about the risks and penalties if you want to get out of the lease early or the large charges for driving over the agreed yearly mileage allowance.
The question is, why would anyone buy/lease a brand new car unless money was never an issue in the first place (other than just wanting the latest models)? Would be interesting to watch another video comparing leasing vs buying on a two or three year old car, and over three years and five years.
Because you have the car under the manufacturer’s warranty. Also, manufacturer’s are in the business of selling new cars….if you take their finance package look at the difference in annual percentage interest rate between a new car and approved….the difference can be huge.
Yeah, that’s why it would be interesting to see the cost comparison of leasing a used car vs buying it. I suspect in that scenario buying becomes more favourable.
@@jasonsfraseryou are talking rubbish. Do you think cars under warranty are bullet proof, but the day they go over 3 years old they explode? Paying thousands of pounds a year to always stay in warranty is absolutely stupid. Buy a separate warranty, pay for repairs as and when they are needed. Either of these would be a far cheaper option if "wanting the latest model" wasn't your motivation for leasing.
The big difference is after 3 years of lease you have no car. After 3 years if you buy the car, you have a perfectly good car and no need to drop another 40k on a new one.
This is a great financial explanation for the pros/cons of leasing. I have been wanting to drive around in something a little nicer than my normal $25K options. I don't know the exact vehicle we're looking for just yet, but I honestly don't have any problems swapping out at the end of their lease cycles. We have a daily driver, so it could be time to add our 2nd. Of course, the vid is slightly different being in socal, but still really helpful.
Just watch out, at the end of the lease, the extras, for scratches et cetera.
@@johnchristmas7522BS. Unless you've been using it in the forest. I have only paid $350 restocking fees.
And here i am buying a 20 year old 3l straight 6. £3k no depreciation, loads of fun, individual, fast and makes me smile!
The depreciation price is way too low. Used cars after 4 years don't loose that much, at least in Spain where I am.
This isn't Spain.
Depreciation curves are much more steep in the first years. If you keep your car for 4 years or more, it is much better to buy. The depreciation curve has already flattened out and the difference between buying or leasing will be much greater. I always keep my cars for 5 years. I once kept a 2013 Tesla Model S for 7 years and it only depreciated 50% of what I payed for, so it also depends a bit on the car.
I came to the comments to see if anyone mentioned this. Depreciation comes up in many conversations but no one credits the owners that intend to not sell their car. I kept my last car for 8 years. My next car will be my last 🙏🏾🙌🏾
Hmmm. Depreciation is nowhere near as bad as it has been historically.
I just sold my 2013 Ford Focus ST2 via Autotrader, for exactly half of what I paid for it 10 years ago. This works out to £83 per month.
Not sure I would find many leasing deals at that price.
Cars were cheaper 10 years ago as a whole.... just check the price of a new ST now.... and then check ones 3yr old with about 30k miles on.... big gap!
Leasing only (potentially) works if you intend driving a new car every 2-3 years and the deal is good or subsidised by the manufacturer / finance company.
Leasing is always cheaper than buying when you lease a car that only depreciates a few percent over the term of the lease…as long as you collect all that equity by trading it in or selling off the lease and pocketing the cash difference between the residual buy-out and the agreed trade or sale price :). Ive done that several times now :)
Thank you Canadian premium performance car market!!
It depends on what manufactures specials are available as well. As stated in the video, not all vehicles will lease well. I would look at PHEV and BEV which if built in the US qualify for the $7,500.00 EV credit. Some manufactures are finding loop holes for customers to qualify for that EV credit. Here in the USA 3 months, Jeep had a lease special on a 2022 Grand Cherokee 4XE that had up $14,500.00 in rebates which included a $7,500.00 EV tax credit. The SUV MSRP was around $62,000.00 and I was able to lease it for around $419.00 a month for 39 months. As far as damage on returning your lease, manufactures offer what's called wear & tear for leases; to protect you for damage.
Cars are basically free in America, compared to the UK. Tesla M3 $28k on US site, UK equivalent is $52k for the basic M3, although I'm sure Tesla have already included the tax rebate, unavailable in the UK
I've always thought this was a really interesting question, especially when you consider high end cars with massive depreciation like luxury barges. Particularly when you think about the failure rates for all the fancy tech in something like an S-class or 7 series.
whenever there is a third party (the finance company in this case) in the equation, it can not possibly be cheaper for you, since they need to earn money as well in order to run their business and be profitable.
Strangely I lease my Tesla through a third party and it was cheaper than leasing directly from Tesla by nearly £100 per month. It all depends on how they decide what the residual value of the car will be at the end of the lease period.
Interesting idea. I think I may be missing something here... My take is :
Even after depreciation, you own the car. After the lease you own nothing.
Trade values are not necessarily the resale or private sale value - it's the trades' micky take that they add their 4-6k profit on top of.
Leasing comes with a host of hidden extras like going over mileage or dinks and dents.
The most obviously thing to do is buy a used 3year old car if you want to save money.
Finally, the interest paid on loans is ridiculous. BMW offering 13.9% Apr on a used car is total madness. 40k cars end up costing in the £50ks. Sell a kidney, pay with cash...
What did I learn today? Well! The best time to buy a car, its When the car has 3 years.
Yh but that's just as warrenty runs out and for most people no warranty is a deal breaker
Bear in mind though, many people will do 0 servicing to that car for 3 years. Even simple things like oil change
@@aidan6557 see I don’t get that as you can spend a few hundred on a warranty extension if that’s a concern. You also have the likes of Lexus with a 10 year 100k warranty if serviced with them, Audi with a 5 year extended option, Toyota and Hyundai at 5 years and Kia at 7 as standard. I’m sure most others offer manufacturer warranty extension at a fee to.
@@caolkyle like who? That literally voids the warranty. I’ve never know anyone not service a new car.
What you said at the end was the biggest thing people need to pay attention to. You can’t mod, you have to pay for any damage and last but not least, your miles are limited! They have different levels of miles at different price points. Most people go with the 10k. This is ok if you have multiple cars in your household, but if it’s the only one you have and you’re single, nope! For us, we are in a financial position where we do a little of everything. We purchase outright, lease and buy. It just depends on the situation and car.
The way i see it,
Leasing costs about the same as the depreciation. But afterward the end of the lease term, youre left with nothing or a big final payment? Whereas if you bought with cash okay its depreciated but youve still got an asset to keep or sell?
Ok if you can afford to buy in the first place or are ok with your money being tied up in the car rather than your bank. As he said, pros and cons.
If you bought outright then you've lost capital that you could've invested elsewhere.
Another point in favor of leasing over buying new: We really can’t know the cars future value - it’s an estimate. Leasing locks the cost in, while buying is riskier - could turn out better or worse than expected when you trade. Of course buying used is always cheaper 😊
Leasing makes only sense if you can write it off on taxes as a company car. If you plan on keeping the car, just pay it off as soon as possible. Or bigger downpayment can’t help reduce payments.
Car buying tip: don’t let them run your credit unless you really want that car and always try to negotiate. If your car salesmen said he did his best, request for the finance manager or manager. But best option is to just ask for cashier check/loan from your credit card union or bank. Car dealerships hate it but don’t mention until you got off those markups
Your math would add up if someone was leasing a car at 0%. But if you are paying 6-7% interest rate on a lease then your total cost of lease is a lot more than depreciation when buying it outright.
Looking for this comment. Totally missed this out.
Yeah 0% finance vs cash is a no brainer. But it doesn't exist on cars unless you're putting a
Best explanation of leasing vs buying I’ve ever heard
The giveaway is only valid for UK citizens not even for EU citizens.
Thanks anyway.
11:22 should've been the first thing in the video. Those are serious drawbacks that will often cost a lot of money that you didn't put into calculations.
Also, with new cars, sometimes you can get a good price on a sale or through negotiations. For example, i got $25,000 discounted from my BMW M4 because dealer put too many carbon fiber bits on the car, plus a mark-up, so it didn't sell for a year and they needed to move inventory so i offered much lower value and we negotiated to a price of a regular M4, but with $25k OEM options that I got for free. Try that with a lease
Personally it doesn't matter, to look outside at an amazing car and to know inside that it's not actually yours, ruins half the experience. A car is more than a machine when it means so much to you.
If you don't use the entire 20,000 miles, and most people will at least slightly undercut that, wouldn't that tip the scales?
Leasing is great for people for who are not bothered about owning the car at the end of the term.
Also, would of been better to word things differently and take into consideration finance vs Lease. Not just buying outright.
As some don't want to lease. They want to be able to own at the end but cannot afford to buy outright therfore buying via finance or even bank loan. And lease vs Finance monthly payments can vary too. My current car a 2023 GOLF GTD is on lease. It was half the deposit and £120 per month cheaper than financing it. Of course I don't own the car at the end. But half the money saved each month on payments banked over the term. Is the deposit for the next new car.
And for the people who say if you can't afford to buy outright don't lease or finance. Stop! I know multi millionares who finance and lease cars. As the value of the vehicles in the bank can make more money invested elsewhere which is a growing investment with the profits covering the payments each month. Its called being smart with your money.
Rory, Rory, Rory - what are you doing? Have you sold your soul? PLEASE, stick to reviewing cars rather than pushing leasing. (1) No sane cash buyer pays RRP and the discounts available dwarf the measly saving quoted. (2) There's no upside to returning a leased vehicle with under agreed mileage, but if you exceed the agreed mileage then you'll be heavily penalised. (3) If you return a leased vehicle with minor "wear & tear"-type damage, again, you'll be heavily penalised. (4) You can't exit a lease early, so you're stuck with the car (and the payments) unless you pay handsomely for the privilege of an early exit.
Excellent comment on a garbage video
Yup, as others have suggested, the wisest choice by FAR is buying a slightly used vehicle. That being said, there are cases where leasing is better. About a decade ago I moved to a region that has harsh winters and terrible road maintenance/infrastructure. In the first 8 years I purchased two used vehicles, both under 5 years old each, both were completely obliterated by the environment, maintenance costs were through the roof as neither had a warrantee, and resale values were a complete joke. Looking over the math, I was shocked to find I was spending much more than a lease payments worth of cash on a car that that was slowly becoming unsafe to drive. I bit the bullet and leased a new car, saved some money (on average over time), and had the peace of mind of a warrantee. Returned the car at the end of the lease period, easy peasy. Would I do this in a region where the weather was milder and the local gov't was less corrupt (ie: maintains the roads)? Heck no. But there are cases where it's better to lease.
Interesting video, however the cheapest financial option in this scenario is to buy a nearly new car in cash, you get a modern car and the worst is of the depreciation has already occurred
Absolutely not.
@@TML34have you got an example of each way to prove your point?
@@galloway9707 if buying new, it’s almost always better to finance or lease when the interest rates are low. The opportunity cost that you lose when paying with your savings is the difference between what you could have invested the cash in, other than the car. If you took your 40k and put it in an investment account that returns 10% and you’re only paying 3% in financing or lease interest, then you’re ahead.
If you’re buying a 3 year old car, as an example, then yes, this is the best option as a huge part of the depreciation is typically within those first 3-4 years. But you will be out of warranty in some cases, so you have to factor that in as well.
After listing to this I'm wondering if Autotrader have a vested interest in this particular video .
The other big part is if paying for the new car needs a loan to pay for the car, then there will also be a substantial cost of interest. I leased my last car and included maintenance. For me this was much cheaper with that particular car, than the equivalent PCP.
I bought a white 2007 BMW 325i M-Sport convertible in beautiful condition 3 years ago for under £5k with full red leather interior - that means no depreciation as we have been offered the same for the car 3 years on and it's a wonderful thing. I call that a win!
Fascinating video, Rory, depreciation is the key measure of how much a car really costs to run. You said that the depreciation value is the amount that you could sell the car for privately, but the value on the screen is quoted as the "Future Trade Value". These are different, and by up to one-two thousand pounds, a trade-in will be worth less, very few people want the hassle, risk and cash flow/management issues of trying to sell an expensive car themselves and so this is important to state. Similarly damage. I cant imagine too many people looking after a lease car to avoid extra loss on return due to damage. Well done, a classy talk to camera. I enjoyed every minute. Thanks. Never bought a car on the never never and I think I never, never will. Bonkers choice of cars, who can afford those prices other than through a business? Happily my ego doesn't require me to spend £5-10K year to keep up with the neighbours. I just drive a reliable tin box that gets me from A to B.
Not mentioned: you do not pay road tax for lease cars as this is included.
What?!, here in Sweden you have to pay it yourself, my C4 cost 500€ a year…
This might work if you want a new car every 3 or 4 years, like businesses that don't want their sales team driving around in old bangers. For nearly everyone else, buy the cars when they go off to auction at the end of the lease so the first owner takes the big hit on depreciation. Vanity comes with a big price tag. I bought my car when it was 10 months old, like new with less than 3000 miles on the clock. Paid about 65% of list.
that sounds great! which auction house did you use?
What’s ignored is once you have a car paid off via loan ending or just buying in cash that monthly you’ve been paying just goes straight to your bank account.
Where as leasing, you'll never stop paying if you keep doing it and you don't even keep the car. Which is fine if you want to get to experience a ton of cars.
Absolutely correct. Lease deals effectively get people onto a 3 year cycle, who wouldn't have bought that often on finance. Consumerism at work.
Great information! Leasing is also great to get these rebates for EVs. I enjoy a new car every few years without taking a hit for depreciation. I rent cars if I am going on a road trip. But those who wish to drive their own car on frequent road trips may want to buy.
yess thank you for this! My family calls me crazy for recommending some people to look at leasing. Their arguement is always one of the following two:
- you don't own the car
- leasing is only for people who can't buy new cars. You should always buy and pay the full price
all depends on whether you want/need to have a new car and the actual lease deal
A couple of points, the owner is responsible for paying the road tax so saving even more, and EV's are plummeting in value so can be a good lease deal, the Ora funky cat on private lease is £181 per month with £2230 deposit, but worth less than half its list value of £32000 after 2 years and an MG ZS EV with a list price of £32000 is worth only £12000 after 3 years
There is a huge difference in private leasing and business leasing.
A lot of variables in the comparisons - mileage allowances restricted via leasing, warranty via buying, how was the depreciation valued considering mileage and history? Worry of minor damage being overly expensive when giving the car back, interest earned elsewhere if car isnt bought. Im really torn which route to go down!
I bought a new car (MAZDA6) with every intention of keeping it for 10 years + My yearly mileage of 6.5k means at 10 it will have done 70k. I worked out from year 6 to 10 or 2nd/3rd car purchase is where I'm really saving. It will soon be 5 years old and still 100% reliable.
I always buy my cars 3-4 years old with low milage for a lot cheaper. Just bought a £70k Audi TTRS Roadster for £42k with 12.5k miles on the clock. It looks and drives like new.
Literally , just a few weeks back, I was thinking about this concept. Now u just made a video on it. Thanks Mate.
Read between the lines; this is just an innovative lease add for Autotrader! 😢😮😂
I would recommend that you add the following to be thorough in your analysis: (1) if you purchase a car for $50,000, you pay sales tax of 7% = $3500, whereas if you lease and the depreciation over 3 years is 40%, you only pay sales tax on $20,000 = $1,400 (a saving of $2100); and (2) if you lease, you will likely have to pay a variety of "acquisition fee" and "document prep fee", which you might not have to pay if you purchase the car.
Buy your cars in your younger years.. starting with buying used that has depreciated. And then Lease in your older years.. when you have less use of the car in question.
The peace of mind and variety will add to your years.
A great video with valuable insights, especially for a novice/amateur to the purchase/lease scene. I've been watching many clips on this and it really is situation contingent, so that magnifies the need to do research and to calculate ones needs/desires and costs pertaining to the vehicle under contention.
You forgot to mention the lease company charge you for every stone chip and supermarket ding on the car when you return it, also if your circumstances change and you need to do more miles the car could end up sat on your drive and you need another car leasing is for companies not individuals, in years to come the lease companies will be sued for miss selling I think, watch this space for that.