Vehicle Leasing

[HRG Tree Services]

Anybody lease there vehicles? so far I've just financed them! Just weighing the pros and cons any advice would be appreciated! Thanks in advance

[richy_B]

I've looked into this before and it is obviously very dependent on your circumstances. I've used leased vehicles in the past and this is my general view/findings (not in a particular order):

 

1. New vehicles are expensive!?! Do I/you really need one? I now buy vehicles at 5 years/60k. It is the best compromise for me of vehicle condition, initial outlay and future depreciation.

 

2. You have to be quite detailed with your financial comparisons. As an example you can lease an average spec hilux for £220 a month (ex VAT) for 5 years. Total cost is £13,200. After 60 months it just goes back. If you purchased the same model you would be looking at around £22,000 (ex VAT) so financing it over 5 years at around 7% apr you would repay a little over £26K. At 5 years you could sell it for maybe £12k so your cost to have that vehicle was £14k. In this scenario leasing is the better financial option. If you did the same thing with a ranger though the lower resale might stuff you. The higher the depreciation rate the better leasing becomes.

 

This is very dependent on if you would sell and get a new vehicle at years or if you would keep the vehicle till 7, 10 years or more. The longer you plan on keeping the vehicle the more sense it is to buy it.

 

The loan rate is obviously important here. If you could get a rate of 5% apr then finance and selling would be the better financial option over 5 years.

 

There is a consideration about how it looks on your balance sheet as well. Having a leased vehicle might look better that a loan on your liabilities. It could also impact on future borrowing.

 

3. Leased vehicles do not generally include servicing, breakdown, MOT (for longer leases)or insurance. You may be tied to going to a main dealer for all work, you may end up paying more for insurance because it is a lease.

 

4. Damage. If you are getting a working vehicle it is inevitable they will get a few knock. I've found the lease company will hammer you for this. That said it is only the damage they can see. That is not to sound dodgy but if you are using a vehicle as a workhorse it could be carrying a ton in the back, pulling a 2.5ton trailer, 7 days a week, stop start driving around town, multiple drivers, etc, etc. In this scenario you might be glad to give it back at 5 years before big wear and tear items arise. I had a hilux used in exactly that fashion and I felt sorry for the poor soul who would buy it at auction thinking they had a bargain 5yr/50k vehicle. The hard life of that vehicle was bound to catch up with it.

 

5. Mileage limits. You generally get 10k PA. Is this enough? If not, agree more up front. You get hammered at the end. I've seen up to 12p per mile charge for going over the limit. If you do 12k a year instead of you 10k over a 3 year lease you'll get hit with a £720+VAT charge.

 

That's my 2 cents worth, hope it helps you decide.

[aitch]

4. Damage. If you are getting a working vehicle it is inevitable they will get a few knock. I've found the lease company will hammer you for this.

 

We're taking our van in to a garage ourselves to repair the dents before handing it back to the lease company.