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To lease, or not to lease?

Fact: Cars are a depreciating asset(A depreciating asset is an asset that has a limited effective life and can reasonably be expected to decline in value over the time it is used.)new car2Every day that goes by, every mile you drive, you’re car looses money. Each time the reg changes (March/September) your car decrease in value. Regular day-to-day cars are not an investment by any means- that’s why I gave up owning one.

Okay I still drive but I haven’t owned a car outright in years.
When I got my driving licence about 10 years ago I bought a second hand Punto with some childhood premium bonds for around £3k and paid the extortionate £2k annual insurance monthly, luckily I worked part-time at a driving range whilst at college which covered my outgoings.
A few years later I traded that in and bought a secondhand Mini Cooper on finance, I got used to paying the installments each month and at the end of my 3 year agreement the car was mine-although I didn’t feel any different for owning it and by the time it was eventually mine I knew it was going to start costing me in replacement parts and services……..

new car 1

Bored of my Mini Cooper and aware of the pending costs I would incur on my next service I looked into leasing and I’ve never looked back.

I like to lease my cars on a ‘contract-hire’ (NOT a ‘contract-purchase’) Contract-hire is when you are literally renting a car for a set period of time, so once that time is up the car is returned to the dealer (yes, you can usually buy them outright if you want but it’s not part of your contract) and this way there isn’t a large finance loan against your name.

Lots of people will lease a car on finance (contract-purchase/hire-purchase) they will pay a deposit plus a monthly amount and have an optional balloon payment at the end. The monthly installments are often higher than those of a contract-hire as the car is being leased to eventually purchase with the entire loan amount being on your credit history.

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For example(rough figures):

A Volkswagon Golf may cost say £20k outright or
Contract-purchase: £4,100 deposit, £195 pm for 47 months + balloon payment of £5k
Contract-hire: £2k deposit, £78 pm for 23 months

The beauty of contract-hire is that if like me, you enjoy driving a new car (for the reliability and fuel efficiency) and don’t want to commit long-term you can simply rent a car paying a much lower deposit and monthly installments WITHOUT the entire value of the car against your credit file.
There are lots of leasing companies out there, I tend to lease through the same company, I order my car with them (and often pick stock vehicles which are much cheaper than ordering to a personal specification) I pay a deposit (usually 6x the monthly rental) and the month following delivery I start paying the installments. I will have a set mileage for the duration of my contract and I will pay for the insurance myself.
At the end of the agreement my car is checked over for general wear and tear and returned to the dealer.

I am a huge fan of leasing mainly because I don’t view cars as an investment and if I did have a lump sum of money i’d much rather spend it paying off my mortgage or on home improvements than financing a depreciating-asset. I know I get bored easily with my car so I enjoy the flexibility of a contract-lease rather than tying myself into a long-term finance agreement.

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3 thoughts on “To lease, or not to lease?

  1. Thank you for explaining the different definitions! I’m coming to the end of my first lease contract and was trying to decide whether to buy the car out-right or go for a lease car again. Your article has swayed me into doing it again as it works really well for me making regular payments and having general costs covered like MOT, service and general wear and tear rather than having to factor in large pay outs that can come as a surprise if things go wrong! Like an unexpected puncture in your tyre. Could you share with me which company you tend to use for the contract hire leases?

    • Hi Clare
      Glad to hear its been helpful to you :) I think if you have the cash to buy a car out right its great but I know I get bored quite easily so would rather lease one and have a little more freedom but its personal choice at the end of the day. There are some really good deals on lease cars- I’ve used Central UK Leasing before as have a few of my friends without any problems. Hope you find yourself a bargain!

  2. Thank you! I will take a look at Central UK Leasing when my contract is coming to an end. I agree it’s nice to be able to replace a car more frequently if you have that option available – plus less risk of things going wrong with a brand new car!

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