Car Leasing Blog

Ok, so you have probably arrived here because you are thinking of or are in the process of leasing a car personally.

Before you do, please take the time to read through these top 10 tips.

1. Do it through a reputable company. This doesnt mean it has to be a dealership or bank, just make sure the voice on the end of the phone has an office, Consumer Credit Licence (CCL) and a Data Protection licence. Without these, your personal data could very easily be compromised and, with identity fraud at its highest, this could cost you a lot.

2. Make sure you choose the right contract. There are a few different types of personal leasing contract available on the market. Make sure you understand the implications of the contract you are undertaking. Get out clauses, early termination fees, is the future value guaranteed,etc.

3. Make sure the company you are dealing with take all the approriate anti fraud measures prior to issuing a contract. We need to battle ID fraud, and you sending proposals without proof of your own ID means that anyone could.

4. Check the returns policy for the vehicle. When it goes back, you need to make sure you are covered for any dents,scratches,etc by the BVRLA fair wear and tear policy.

5. Check, and i mean Check the vehicle order when you send it back. I have lost count of the number of manuals which turn up as autos, 3 doors which turn up as 5 doors,etc.

6. Sign for it yourself. And please,please,please do not sign for it if it is not perfect. Scratches will not get sorted later, despite what the delivery driver says. Write it down on the delivery note - you have got some come back.

7. Make sure you are insured - Most insurance companies will insure personally leased cars as a matter of course, but they need to know. Dont give them an excuse not to pay.

8. Make sure the personal leasing company you are dealing with has a customer service department. If anything goes wrong, salesmen arent too interested in getting it fixed after they have been paid commision.

9. Organise the return of your vehicle well in advance. If the contract goes over its return date, at best you will be charged. At worst you will pay for the remainder of the vehicle (I have seen this happen a number of times and cost consumers thousands).

10. Try to get any repairs (dents, scratches,etc) fixed at your local body shop prior to return. You will get charged for them otherwise and there is no way of getting the vehicle back afterwards to get it done.

 If you try to follow these tips of personal leasing, you shouldnt go far wrong, but any problems, give me a shout

Lets start from the beginning - the two conventional ways of purchasing or driving a vehicle are as follows:

1. Buy it cash (or remortgage,loan,etc)

2. Get it on finance (almost always Hire Purchase)

These have been the most popular ways of aquiring a new vehicle conventionally, and have worked for some time. But they are out of date, and this article will reveal the reasons why.

Who is this article aimed at?

Anyone who drives a car personally, be it through car allowance for work or for picking up the kids and shopping. I have decided to give two forms of information in this article, the laymans view and the mathematical view.

Firstly though, let me say this - the second you mention leasing to most people (82% of the population actually) they reply “I like to know that I own it”

Wrong!

Most consumer vehicles are purchased using HP (Hire Purchase) in this country, and as such you dont own it until you have made payment of the admin fee with the last payment! Check your documentation, and tell me I am wrong.

The consumer rotation for vehicles in the UK (this is the average amount of time a consumer keeps a car for before selling or part exchanging the vehicle) is 27 months. So on the most part, no body owns their vehicle (when it is a new or newer car).

Buying A New Car With Cash

Ok, so this also entails using a credit card or other type of loan where you would just walk into a dealership and write a cheque or hand over cash.

The biggest problem with buying with cash (we’ll call it BWC from now to save hand cramp) is its dead money. John Paul Getty (the richest man ever recorded to you and me(yes it was more than MicroGates)) once said “If it appreciates buy it, if it depreciates lease it”. What this mean is, if you have got £15k lying around to throw at a new car, it would be better off somewhere earning money (house,kitchen even the dreaded ISA) than sat on the drive getting wet,rusty,scratched and slagged off by any motoring journalist that didnt get one for free.

Now you wouldnt buy a new kitchen and flat screen tv to leave it outside in the rain would you?

New cars (in the 27 month period we keep them) always (with the possible exception of Veyron’s and such like) depreciate like bricks. Normally, your average family saloon is worth about 25% of its new value after 3 years of use and kids spilling KFC in the back.

So, in short - it may well feel really good to go into a dealership and weigh in 20 grand for the new motor (and I know, have done it plenty of times in the past) and you may well feel that the salesman holds you in great regard for doing so, believe me its not such a great idea and the salesman isnt thinking about your 20 grand, he’s thinking about the next pair of Next shoes he’s gonna buy with the commision you are about to earn him.

Hire Purchase

Done incorrectly, quite possibly the most expensive way of having a new vehicle. You pay for the lot. Car, Depreciation, Sales Commision, Interest,etc,etc

Quite alot has been investigated about the way cars are purchased this way, even to the point whereby APR (A load of tat to you and me) has pretty much been outlawed and replaced with AER (A lesser load of tat to you and me). I have seen APR’s which equate to massive base interest rates that would litterally scare the life out of you if you actually knew what the APR actually mean in terms of £’s.

If you are going to HP, read this section very carefully - and its not difficult not to get stung - Ask for the base interest rate!!!

They may be reluctant to give you the base rate, but insist - this is your money. The base interest rate will tell you, per year how much money (as a percentage) you will pay to the finance company for the facility of borrowing the money.

Here come the examples:

Example 1:

£10,000 loan

5% Base rate of interest

4 year loan

The calculation is 5% of the loan (£500) multiplied by the term (4 years) giving the total amount you will pay to borrow the money (£2,000)

So you can see you are paying £500 per annum for the facility, giving a total interest paid back of £2,000 (or 20% to the ever protective finance boys).

Once you have the base rate, make your descision weather you are going to do the deal or not.

Ok, So Tell Me Why I Should Lease

No, shant

I spend most of my working life telling salesmen to stop pushing the product and start pushing the facts, so I’m not going to tell you why you should, I am just going to tell you what the difference is and why I think its a better product.

First of all, the fundamental reasons why its a good idea.

1. Fixed monthly cost - If you bought the car with a credit card, the cost goes up and up. If you buy a second hand car, the inevitable maintenance costs and out of warranty repairs will have you crying into the credit card statement in no time. With a personal lease, you will pay a fixed monthly cost throughout and - if you’re sensible - get rid of the thing before it runs out of warranty.

2. Not Liable For Residual Value - On a lease, the residual value is fixed, so for example (yes i know its the second example) when a well known TV journalist decides to run your car down (because he or she didnt get a free one) just after you bought it, and the resale value hits the floor, the finance company take that strain - not your wallet.

3. Purchase Aggregation - This one is a little more complex, but everything is cheaper on bulk, especially cars. A leasing company will buy 1,000s of cars in one sitting, realising a massive discount which, in most cases gets passed on to you. These sort of discounts you will never get with your Tesco’s bag full of cash, no matter how many friends or family you have working at the plant.

4. Overhead reduction - Leasing companies (on the most part) dont have showrooms full of cars,lights and lazy salesmen, they normally have offices with computers and administrators. Carefull Though, there are a few that are run out of bedrooms and home offices - you will not get the support you need!

Basically with personal leasing, you only pay for the bit you are using, so when you get the idea out of your head that its not yours (and believe me, its nothing to boast about - a bit like boasting “May house value went down 20% last year - yey!”) it actually becomes a really viable option.

How do I know? because the personal leasing sector is growing. Massivley. Try 18% per annum for the last 7 years, and its picking up speed.

Any questions?? Crack on and ask them. I check this thing all the time. And if you wouldnt mind linking to this article, please do.

Regardless of whether you are a business or an individual looking for a new car there are a many varied and cost effective ways of financing the vehicle that will be able to meet your needs…..below are some simple explanations of some of the more popular options. …..Contract HireContract Hire is the leasing of a vehicle, normally to a vat registered business or company, for a set time and mileage at a fixed monthly rental. The monthly rental is determined by the cost of the vehicle, the period and mileage covered as well as the resultant depreciation. Maintenance packages are often included within Contract Hire agreements, but are not obligatory. …..Sale and LeasebackSale & leaseback can be used when your company already owns its own vehicles. Your fleet of vehicles could be purchased at an agreed realistic market value and then leased back to you through the funding method of your choice. This method removes any residual value risk for your company and would enable a cash injection into your business thus increasing your working capital. …..Outright Purchase Price CheckFor many people the concept of buying a car outright is daunting not least because the future value of the car is so difficult to quantify. The added complication of maintaining the car and the costs associated with this may make it a less attractive option. However if you are in the position of having cash to purchase your chosen vehicle outright and feel comfortable with the concept of servicing, taxing and disposing of it then shopping around for the best deal is important. Make sure you barter hard as somewhere a dealership will want to sell a car to hit its ‘target’ and will be willing to sacrifice profitability. ….Personal Contract Hire Personal Contract Hire, as its name suggests, is essentially the same as Contract Hire but for private individuals. If you want fixed cost motoring, or have opted out of a company car scheme then Personal Contract Hire could provide you with hassle free motoring without the residual value risks associated with traditional ownership.VAT is built into the monthly payments, but is not reclaimable by private individuals. Maintenance packages are usually available so that you don’t get any nasty surprises. ….Hire PurchaseHire Purchase is the traditional method of financing a vehicle with the vehicle becoming the property of the lessee at the end of the period. The monthly payment is determined by the amount of deposit paid, the period of the contract and the sale price of the vehicle. ….Personal Contract Purchase
Personal Contract Purchase (PCP) is a method of funding where an individual leases a vehicle for a set period at a fixed monthly charge. At the end of the contract, there is an optional balloon payment which the individual can pay to buy the vehicle otherwise they can choose to return the vehicle with nothing further to pay. The monthly charge is governed by the initial cost of the vehicle, the mileage covered, the period of the agreement and the estimated value of the vehicle at the end of the contract. In addition, features ranging from basic servicing to total vehicle management packages can be included if required. PCP being an alternative to Hire Purchase, the traditional method of financing, is also covered by the protections as set out in the consumer credit act.