Car leasing v buying used? It’s a no-brainer
cAs someone with almost a decade in the retail motor industry behind me, I like to think I know a thing or two about buying and selling cars. Despite my experience and contacts in the trade, I made a common, amateurish mistake when it came to getting a car myself.
That mistake was to go and buy a second-hand car or, perhaps I should say, the mistake was not leasing a new car in the first place.
I live in a town centre so, with no real reason to own one, I went without for a while. However, the arrival of a Doberman puppy that needed copious amounts of exercise meant a car was essential to take him out of town to safe, open spaces. I'd flirted with buying a car at auction for a while, but I decided to buy privately for myself to minimise any risk.
I finally settled on a 10-year old Peugeot 307 with a 2.0-litre petrol engine. It represented good value, because most people wanted the diesel model. As I do very low mileage, fuel economy isn't really an issue, and the 307 was a lot of car for the money – only £1,500, with a full 12 months of MOT and good service history.
To be honest, the car never broke down or struggled to start, but problems came after a year, when it was time for a new MOT. To keep it roadworthy, I needed to spend over £500 on the brakes and, although they had minimal wear, the age of the tyres meant they had cracked in the grooves and were marked as an "advisory" – a note saying "not safe to drive" didn't exactly brim me with confidence to say the least, even though the tyres weren't an actual MOT failure.
Having just shelled out £500, and facing another bill for a new set of tyres, it was time to think again.
Having just shelled out £500, and facing another bill for a new set of tyres, it was time to think again. After all, market value had dropped below £1,000 thanks to steep depreciation, not to mention the road tax was due – that’d be another £200.
I thought about buying a newer second-hand car, but that would mean a finance deal (with exactly the same worry of maintenance costs). Even if I bought something relatively cheap, the payments over a three-year period would have been over £300 per month – I needed a car, but I didn't need one that much. Besides, by the time I'd paid off the finance, the car would probably have only been worth two or three thousand pounds at best, and it's the sort of deal I'd spent years telling customers was a bad idea.
After a couple of days of procrastination, I was researching an article about the specifications of a new car, and one of those annoying pop-up adds on Google caught my eye. As I'd been looking up a car, the cookies deduced I must be looking to buy one and up came a leasing deal. As it turned out, that particular deal didn't suit, but it got me thinking all the same.
I'd spent years asking customers why they would buy a used car that depreciated so much when they could lease one and not worry about losing money, so why not take my own advice?
When I started to actually look at what leasing deals were out there, I quickly realised this was the only way to run a car. I'd spent years asking customers why they would buy a used car that depreciated so much when they could lease one and not worry about losing money, so why not take my own advice?
I didn't care about my next car's make, model, engine or any of the other things that make you want a particular car. I just wanted something that was reliable, comfortable, reasonably priced and with enough room for the dog. In fact, the only feature I was determined to have was rear parking sensors; anything else I might get would be a bonus. I didn't care if it was diesel, petrol, hybrid, manual or automatic, I really wasn’t fussed.
I ended up with a brand-new Peugeot 308 1.6 Hdi Active. I hadn't seen one in the flesh, never mind test driven one, but the deal was frankly impossible to turn down. The advance rental was £562.07, and that was to be followed by 23 monthly payments of £187.36, all of which included VAT and road tax.
The first thing to note is that's the same length of time we go before most of us can upgrade our mobile phones on a contract, but it would mean I'd be able to get another new car, which is a lot more exciting to look forward to than a new phone!
To buy the car outright would have cost over £19,000 at the time, and that's without any finance interest charges. Over the two-year period I would be paying out a total of £4,871.35 to lease it instead, and because I don’t do a lot of mileage, I wouldn't have to worry about replacing the tyres, the exhaust or any other wear-and-tear service items.
My only other costs would be annual services, insurance and fuel – all of which you would have to pay for in any case.
Leasing was also really simple, as once I'd decided on the deal I wanted, all I needed to arrange was the signing of the forms online and email a scan of my driving license over as proof of identity and that was it. All that was left before the car was delivered to my door was to send proof of fully-comprehensive insurance for the new car.
The Peugeot is due to be returned in just over a month from the time of writing this, so I've spoken to a few contacts in the industry to find out what its trade in value would be if I was trading it in. The absolute top price I was offered was £8,170 – well over £10,000 less than it cost new only two years ago.
Was it worth it?
I've paid out just £4,871.35 and saved myself over £5k in two years, and I'm now looking forward to my next car arriving in just over a month.
So, if I'd bought the car outright I'd have lost over £10k in depreciation. Instead, I've paid out just £4,871.35 and saved myself over £5k in two years, and I'm now looking forward to my next car arriving in just over a month.
For me, leasing is a complete no-brainer, and if you've never looked into it yourself, it’s really time that you did!