There are lots of ways to buy a car. You can pay cash, part ex and arrange finance or any combination of these three. What you do depends on how flush you are and who you are buying from. The UK car market is increasingly competitive with prices getting lower, specs higher and finance deals increasingly flexible (and more complex).
Buy or Lease
Traditionally people have needed a good reason to lease a car as it was seen as dead money. You pay a sum each month to rent the car and at the end, you do not have anything to show for it! The car is not yours so you can’t sell it to raise money towards your next car. However, there are costs inherent in car ownership that you can avoid when you lease and when you factor this in car leasing becomes very attractive.
Depreciation
After three years a new car will have depreciated on average by 60%. This means if you try to sell the car you will only be able to sell it for 40% of its original cost. Of course, this is an average and there are large variations based on the mileage the car has done, its condition and the make and model.
There are a few notorious car models that depreciate very badly so you should think carefully before buying them new – a second hand one should be a very good deal though.
Depreciation is a real cost so it is important to think carefully about how it will affect the actual cost to you of car ownership. Take a look at the example below.
Jaguar SE on the road price £30,245.00.
After 3 years you sell if for 40% of its original value or £12,098
So the money it has actually cost you to own the car for three years is a whopping £18,147!
However what if I told you that you could drive the same Jaguar SE for three years and it would only cost you £10,000 and you wouldn’t have to bother selling it at the end? We took the prices for a personal car lease from car leasing made simple for three years. The total cost of 36 monthly lease payments was just under £10,000 – the business lease is even cheaper!
These days the car leasing market is incredibly competitive and monthly prices are low. In many cases, they are the same or less than a car loan and you don’t need to have a large cash deposit.
Doing the same with a Ford Focus. You can buy a basic model for about £21,000 and after three years the cost of depreciation is £12,600. Lease it for the same time and the cost is only £6,500!
Remember that if you buy your new car with finance the cost to you will be even more because of the interest built into the loan repayments.
