Poll Should I lease or finance a car?

[Centurion]

Hello ladies and gents!

This week I did the unthinkable. I accepted a job that's slightly outside London and need a car to get to and from work! What I need your advice on is whether to lease or finance a car. Before you ask the obviously question, I shall give you the answer: Yes I really do need a car. Getting to my job using public transportation will at the lowest cost £404/month and take 1h and 40min door to door.

That sum of money is enough to finance/lease a car as well as cover petrol and other associated costs. More importantly the journey car, which I did yesterday, took just 1 hours and 1h and 15min. Not to mention the obvious benefit, which is to actually own and a drive a car - I am a car fan after all

My main financial objective is go for the option that will make most economic sense if I decide that I after 18-36 months I no longer need a car.

Financing a new car
I am to stay with the company for 2-3 years, but London is a fast-paced city and people do move around. If I then after 2 years decide to take on a job in central London, which is where most of my opportunities are, it is 99% likely that I will have zero use for a car. That makes it unfeasible to finance a new car, take a hit on the first 12-24 of depreciation and sell the car.

Leasing a car
Currently I'm leaning towards leasing since it's hassle free in the sense that I don't need to worry about maintenance and will have access to a curtsey car should my one be out of service. However some of the leasing options are terribly boring.

Financing a used car
The pleasure I see in financing a used car is that I can pick a fun car instead of leasing a generic snooze mobile. Another benefit of buying a used car is that the payments I will make will go towards me owning the car. What worries me is that the benefit of owning it will be outweighed by depreciation and maintenance costs, which means that when the car is sold, I might barely have saved more money then I would have done by leasing a car.

Given the above factors and thoughts, what do you think I should do?



Many thanks

 

[Yaz]

Long time no see.

I say financing is the way to go. Yes, you pay a little more than leasing, but in the end the car will be yours.
With leasing, you make all those payments, and at the end you give the car back.

In the end, I don't really like either option. I'd save a little cash and get a used reliable car. I like to own my cars. Don't want someone to tell me what to do with my car or how much mileage to put on it.

 

[ateekt]

Finance a used car. You'll own your investment. You won't have to pay for the high price of a new car. You won't have any usage limit, required by lease vehicles.

 

[Beemer B773ER]

Although I'm not at a stage where I need to consider this in detail, I too am interested in these different scenarios.

From what I've learnt, leasing is of course attractive because you get a new car and the low/free maintenance that comes with that. With leasing, the payments you are making is simply what the car would depreciate after 2-3 years. So, when comparing lease vs. financing a new car, I think leasing would be the way to go because the monthly payments are less, and after the lease term, if you like the car and still require it, you can then buy/finance it. I think financing a new car is more of a long-term investment because only after you have paid it off does it really pay off.

The most sensible/economical decision IMO is to finance a used car, as long as it is a used version of whatever new cars you're considering. If you get tempted and start shopping for a fancy used car that is the same price as a brand new economical car, then you're going to end up paying more because of maintenance and possibly even insurance depending on the type of car.

I guess in your situation, you have really think hard about whether you will need the car after 2-3 years. If you're unsure, then maybe leasing will be a bit of a risk, because what are you going to do after the lease period? Buy/Finance the car, look around for another 2-3 year lease?

Again, I haven't researched these scenarios is absolute detail, so I'm sure others will be able to provide more personal experiences.

 

[Centurion]

Thanks for the advice guys. In my heart I would love to finance a used car of my choice - a sensible but fun car. The only thing that worries me is repairs and maintenance, especially because I don't know a garage and mechanic here in London and fear getting milked for cash. I will be making a decision next week and will let you know the outcome.

 

[E90Beast]

I prefer financing, leasing is essentially paying to borrow a car. With financing the car is actually yours.

 

[Beemer B773ER]

Thanks for the advice guys. In my heart I would love to finance a used car of my choice - a sensible but fun car. The only thing that worries me is repairs and maintenance, especially because I don't know a garage and mechanic here in London and fear getting milked for cash. I will be making a decision next week and will let you know the outcome.

Hey Luw, what is the monthly amount for financing, and how does it compare to the lease payment?

 

[Sunny]

With few exceptions (like being able to get a tax write off for your lease payments or some special lease programs with high residual values) financing is almost always financially better. Of course buying a used car always beats buying a new car (unless it is one of those rare cars that will appreciate). If you are really worried about maintenance/warranty get a CPO car.

 

[CBlack0]

This is a great poll and there are many things to take into consideration. One of those things is if your credit is good, this will make financing a great option with a low interest rate of course. Ask yourslef, do I want to lease and never own or finance and own eventually? Do you want to get a bank loan or financing through the dealership?

Personally I had great credit and I wanted to own my car after a few years, so I bought my Mercedes-Benz used with low kms. I also got a great interest rate of 5% through the dealership, which was awesome. It can sometime be hard to find a used luxury car dealership that has a financing option, I find many dealerships lease these days.

My one recommendation if anyone is looking in Pompano Beach, Florida, they can check out the Fort Lauderdale Collection.

 

[E90Beast]

I know a lot of people don't go for the extended warranty or anything like that, but if you have the money definitely get it. I made the mistake of not getting it for my E60 figuring I wouldn't need it and then next thing you know I had to shell $1,200 out of my own pocket for just a new water pump.

Not sure of your financial situation, but if I personally had an hour and 15 minute commute to work daily I would probably buy a little $5000 Miata that I could pay off, or finance very cheaply for a year or two, that would get great gas mileage and wouldn't matter to be putting lots of miles on daily.

 

[Beemer B773ER]

Hey Luw, did you end up making a decision?

I'd be interested in the specifics of each scenario, and what you ended up going with?

 

[Porsche Guy]

Get a financial calculator and run the numbers. They don't lie.

 

[Zonda]

Since this is most likely a temporary job I wouldn't advise to finance a car that you're uncertain of how long you will keep it.
That is unless you plan on paying it off in that time, which should result in a very high monthly cost.

Selling an unpaid financed car can be a real hassle and loss depending on your credit provider.
I'd buy a cheap pos, or lease.

 

[Centurion]

Hello guys! I'm amazed by the diversity of views you have provided and feel well informed! Sorry for not getting back about the outcome. I accepted the job on a Wednesday and agreed to start on the coming Monday. So on Friday I sent a text to my main car buddy and asked for his advice. Over the past months he had been deliberating over whether to buy a M235i, Cayman or GT86. Coincidentally he had decided to buy a GT86 on Saturday and asked me whether I want his existing car. (I will drive his GT86 in the coming weeks and post a review here).

Given that the only car I could afford to lease on a 6 month term was a Fiat 500 or Vauxhall Corsa, I was open minded about options that didn't feel like tupperware on wheels. The car he was offering me was a Toyota Celica, Generation 6. It's black, had the tyres replaced this year, has Momo rims(even on the spare wheel) and an Alpine Stereo with upgraded speakers and iPhone connectivity. What really peaked my curiosity is that he had only owned the car for 3 months. Previouslt it belonged to his boss who bought it off a house wife. It's totally unmolested, doesn't have a single scratch and looks well groomed on the inside. It even has a full service book with receipts - I got a big pile of it as proof that the car had been well looked after.

I test drove it and instantly feel in love with how the multi-link suspension negotiates speed bumps and road irregularities. Unlike the Fiat 500 which I have driven twice on holiday this year, the AC works wonders when its hot, there is never any loss of traction when driving over wet potholes on twisty roads and more importantly road noise is low on the motorway. My friend offered to me at a lovely price and it's now my car. The downside is that insurance cost me £170/month which is preposterous given that I'm 27, have had the licence since I was 19 and have never offended. But that's things work in London: Used cars are cheap, insurance is extortionate. FYI this was the cheapest quote I got!!!1

The experience of driving an analog rally car has definitely shed light on what I will be looking for in a car when I will be in frame of mind to upgrade, which will be in January: A car that offers a lot of feedback through the rack and tyres but is comfortable to drive fast on the motorway. The journey to work is 65km for those wondering

My biggest reason for upgrading will likely be the stiff clutch and lack of power assisted steering. On at speeds above 30km/h its a lovely car with a very flexible engine, but in start-and-stop traffic it's a bit of work. At least it's good to discover that my squats, leg presses and bench pressing has practical use . The maintenance cost that I will incur driving such long distances will dictate whether my upgrade will be a financed or a leased car. The financial objective will be to, on average, spend no-more than £300 a month on installments/service/maintenance over a year.

 

[Betty Swollocks]

Congratulations on your car by the way.

The downside is that insurance cost me £170/month which is preposterous given that I'm 27, have had the licence since I was 19 and have never offended.

That's over GBP 2,000 per year!!

Are you sure that's the best you can find?!! I know it's London but that is ridiculous! I know it's possible to insure much more exotic cars than a Celica for half that, and in London too. People on other fourms talk about GBP 800 per year for cars like an M3.

My M135i costs GBP 1,000 per year to insure and that includes unlimited driving in Europe.

It costs around GBP 180 per month to insure my Audi A1, VW Up, AND my R8 V10 combined!!

 

[Centurion]

Congratulations on your car by the way.



That's over GBP 2,000 per year!!

Are you sure that's the best you can find?!! I know it's London but that is ridiculous! I know it's possible to insure much more exotic cars than a Celica for half that, and in London too. People on other fourms talk about GBP 800 per year for cars like an M3.

My M135i costs GBP 1,000 per year to insure and that includes unlimited driving in Europe.

It costs around GBP 180 per month to insure my Audi A1, VW Up, AND my R8 V10 combined!!

Thanks!
Yes that was the cheapest. Insurance in London can be very expensive - especially if you are driving a car which is typical owned by people who are accident or fraud prone. It can be cheaper to insurance a 2014 X5 in Kensington then it can be to insurance a 2003 Mini Cooper S in Tottenham.

This is why used cars are so cheap in the UK, because even if you want a buy a car for as little as £100, you could have to commit to spending £500-1500 on insurance over 10 months. In Sweden it's the total opposite, used cars are much more expensive but insurance astronomically cheaper.

Bare in mind that I'm a first time car owner in Britain. I'm sure my premium will go down if I don't make a claim during my 10 month term.

 

[Betty Swollocks]

Bare in mind that I'm a first time car owner in Britain. I'm sure my premium will go down if I don't make a claim during my 10 month term.

So you don't have any "no claims bonus" applied? That would explain a lot as it would make a big difference.

 

[Yaz]

Wow, that is a lot for insurance. I pay a little more than that for the X5 every six months in NYC.

In the US, your insurance shouldn't be that high if you're over 25 with a clean record like yourself. I also think it's helpful that you use a lot of rentals before getting your first car. At least in the US.