How much "extra" money does a car lease cost above buying outright

[discipleofchristmysaviour]

Hello. Am considering buying a 3 year old car outright, or delaying that purchase by buying a lease car (new/used) for 1-3 years. I know buying outright is the most sensible for my long term wealth therefore I'd like to have an indicator of the overall extra cost of taking a lease instead of buying outright. When I say overall cost I mean the reduction in wealth once the lease is up and I've payed for the delayed outright purchase.

Outright cost is A, with estimated maintenance per year of B, expecting the car to last C years where the residual value will be D

Lease cost is E per month, maintenance of F per year. The cash I've saved by not spending A can be invested at a rate of G. The lease will last H months.

Firstly, is this the right way of thinking about this? If it is, I just need to put in some estimates for the letters and work it all out with some sensitivity analysis.

Secondly, are there any sensible online calculators/Google sheets that exist for this already?

(Unfortunately like many in this sub, much of my life decisions are rules by calculation of costs and risks, I'd like to decide based on my gut rather than head, but I'm not financially stable enough yet!)

 

[famohseven4b1g]

@discipleofchristmysaviour Depends on the lease. Smart lease buyers go for whatever is on offer and ticks their boxes rather than a specific car. The Pug 408 was being given away for about £220/mo last week, and next week another manufacturer will want to fill their RHD order books. Keep an eye on leaseloco and be prepared to move quick.

 

[famohseven4b1g]

Still is actually, just had my filter set wrong: https://www.leaseloco.com/car-leasi...-12-0/e120c67e47c54fad7aacd02f5d3af674/config

£355/mo amortised over 2 years for 10k miles a year. Not bad!

 

[inha]

@famohseven4b1g I literally ordered one of these last week. My current one goes back in May and was looking out for something and this deal was too good to turn down. I got a zero deposit, 10k miles 18months for £320. I also went to the Peugeot garage to check out the car and I got them to match the price and throw in a free choice of paint which was a decent bonus.

 

[timofey]

@inha Whats your delivery time line? I've just ordered one. I wanted black but they were quoting June, gone with Selenium grey and been quoted 9th Feb. Need it sooner rather than later as our 12 year old car needs some immediate costly work so want to just see it gone and finish with the stress.

 

[inha]

@timofey They told me end of April for mine. I went for selenium black too, such a nice colour. I’ve only got this for 18months and the car looks really nice

 

[temaka971]

@discipleofchristmysaviour Assume you mean PCP or hire purchase because lease generally means you will never own the car.

You’d need to look at the overall package provided with the car, assuming it’s new, which would include the discounts, service plans etc. dealers generally offer better discounts on PCP because they are incentivised to sell it. And then the interest cost on top.

You’d probably get a slightly worse discount paying cash upfront for the same car as the dealer wouldn’t have access to the same discount levels for the reasons above. But then you can shop around and play dealers across the country off with each other.

I guess to do a total ROI comparison you’d need to factor in the dealer servicing costs over a certain period, eg 5 years, plus a set of tyres in that time.

 

[rams3150]

@temaka971 you can often offer to buy the car at the end of the lease (since it's going to be sold anyway).

 

[jillbloom]

@temaka971 I'd argue the discounts don't need to be factored into the comparison as a distinguishing factor, unless the rules have changed recently.

When I last bought my car in 2019 you could buy a car on PCP (for the various discounts) and then cancel the PCP agreement without any financial penalty other than paying the interest cost for however many days the agreement was in place for.

Worth checking the fine print with the finance provider before you embark on this and you'd need another funding source lined up to pay off the PCP loan (either cash or another loan in place).

 

[tenderfoot62]

@discipleofchristmysaviour I leased a polestar 2 through my Ltd company for the past 3 years and it’s worked out substantially cheaper than buying it outright.

Lease payment was 490pcm (agreed just before car pricing went stupid during covid), can claim half the vat back too, so total cost to my business for the three years was a little over 16k.

Just agreed to purchase the 3 year old car now for 24,500 from polestar. So total outlay about 40k. List price was 52ish I think. Plus obviously you still have an (albeit depreciating) asset with a value.

 

[rams3150]

@tenderfoot62 Really nice timing! Unlikely to be similar now with the much higher interest rates.

 

[whiteninja73]

@rams3150 The company I work for just announced an electric vehicle leasing scheme with salary sacrifice for the lease payments. We had a few webinar presentations from the electric company running it.

None of us can work out how it's advantageous to us, and it seems to rely on a massive depreciation for it to get close to breaking even versus simply buying the car outright or via PCP.

We suspect that it was just a way for the energy company to get hold of the contact details of lots of highly paid engineers.

Seems to have worked because they're now pushing us hard for sales and more information.

I kind of feel sorry for the Pizza Hut in Cambridge who are getting all these phone calls as I never gave them my real phone number ...

 

[christophermyers]

@whiteninja73 You need to be tax payer well into the the 40% bracket for it to be worth it, so that if you salary sacrifice the whole lease you’re still in the 40% bracket.

£500/ month lease turns into a £300/ month net deduction as you’re saving the 40% tax. Whilst you have to pay BIK, that’s 1-2% for EVs.

Especially useful as well if you’re needing to get just below £50,000 for child benefit.

 

[whiteninja73]

@christophermyers Most of the engineers are on between £50K to £150K.

The EV leasing website has a calculator which shows the estimated net cost based on a particular salary.

Even when we crunched the numbers for that, we saw that the car would need a 50% depreciation after 4 years to get close to breaking even.

e.g. a Tesla 3 was quoted at £457 (net monthly salary) for a 4 year lease.

The only upside seemed to be the extras: insurance, maintenance, accident management, roadside assistance, home charger, first 4000 miles free (some sort of voucher scheme).

 

[pinkbandana9]

@whiteninja73

e.g. a Tesla 3 was quoted at £457 (net monthly salary) for a 4 year lease.

I have seen a quote of slightly less than that but to consider:

if you are near a boundary (50k or 100k) then the SS scheme makes more sense as there are then further tax advantages.

The only upside seemed to be the extras: insurance, maintenance, accident management, roadside assistance

Here is one of the real bonuses: EV insurance is higher than ICE, roughly double from what I have seen and people always underestimate the associated costs (maintenance, tax etc). Its probably worth 1.5-2k per year.

 

[wildlifeturner]

@pinkbandana9 Toyota bz4x was £250 a month on lease loco a week ago with a 10 months payment up front

 

[timofey]

@whiteninja73 When you say breakeven what do you mean exactly?

These schemes are beneficial to those who would have PCP/PCH/Leased a new car anyone but can now do it tax efficiently. You profit by making that tax cost saving. If you were never going to get a new car then of course its no benefit to you. Please clarify if I've misunderstood what you mean.

 

[whiteninja73]

@timofey Sorry, it was a poor phrase to use. I meant the depreciation would have to be at least 50% for the lease scheme to be comparable to paying cash or getting a good PCP deal. (ignoring opportunity costs)

The energy company did say during the webinar that most people would probably want a PCP instead of the lease. But they advertise it to make it look like the lease agreement is a "good deal".. e.g. "40% off the price of the car". When it's really just a 40% tax benefit discount on the monthly payments, which I think were inflated anyway.

So I suspect that the energy company see the scheme as a good way to get some high value leads.

 

[xians_have_no_morals]

@whiteninja73 Not sure it's fair to consider car insurance and a £1000 home charger as "extras"
Surely that needs to be considered in your calculations?

Probably tax included as well which you've missed.

A possible downside is what happens if you change jobs?

 

[tyxaerlyn]

@discipleofchristmysaviour Generally the £10k car will last 10 years…. then over the course of that 10 years, say £3k for repairs, some years it’ll go straight through, some it won’t, tyres.. but £3k is a good average I’d say.

13k/10y/12m = 108pm = 23k over 10 years. You could double the repair bill and it’d still be 20k saved over 10 years on a 300pm.

Totally ignoring any value at the end of the 10 years, and likely over-estimating the repair bill for some, but like I said, probably around the average. I calculate my car, bought outright to have costed me closer to £80pm as I look to move elsewhere so have a decent value on it now.

This isn’t me scoffing you by the way. Just adding a bit of info. If you like cars or the ease of mind is worth it, then who really care?