Without having a huge amount of cash lying around waiting to be spent on a car, it would be easy to think that there is no way for you to drive the latest cars around, and be stuck driving older models. Typically if you want a car, you buy it, then after 5 years you want a newer model car, but you’re stuck with a car you may struggle to sell for anywhere close to what you paid. Contract Hire & Leasing – This is without considering the amount you’ve spent on repairs & maintenance of the car. Many people dismiss leasing a car as something best used for short term purposes, as a way to show off your car without spending thousands on a regular basis.
Contract Hire & Leasing – Maybe once this was true, but over the last few years leasing a car on a long term basis has become more viable an option than ever before.
Rather than buying a car and then selling it 2-3 years later with a loss in value, known as the depreciation, car leasing is based on the principle that you rent the car from the lease operator and your payments cover the loss in value between leasing the car and returning the car, plus a small amount of profit to the car leasing company.
Based on this, ordinarily you might pay £20000 and sell the car for £14000 3 years later, with a loss of £7500 plus maintenance & repair costs. Leasing a car means you would be paying the £8750 over 3 years, or £2916 a year spread out in monthly installments of less than £250.
Contract Hire & Leasing – The loss in value of a car over a period of time is much more important when looking at a 2-3 year time period, typically this value is worked out as; roughly 25% of the cars value is lost in the first year, 13% for the second, 7% in the third, it follows this pattern of half the previous year’s depreciation. So while over a longer period of time leasing a car may not work out to be cheaper due to the much lower depreciation, leasing a car is usually done over a 2-3 year period. Selling a new car this regularly would lead to huge amounts of money being lost with the higher depreciation, but with leasing a car the depreciation is what you pay for, rather than the cost of the car.
It is in the best interest of the car leasing operator to keep the value of the car as high as possible for the duration of the lease. This is because at the end of the leasing period the car is returned to them, after all it is still their property. Because of this most car leasing operators will offer free maintenance for the car, plus the new car warranty that will likely cover the new car you are leasing.