Car leasing virgin needs some hand-holding...

EricTheWeary

BlueStrat said:

6,500 up front on a crappy honda e seems a piss take tho?

I think £1k of that is government grant. Would be interesting  to know how generous they would be with PX - once they have you as a lease customer you are a magic money tree for them potentially for years to come. 

Maybe in 20 years we will just be hailing driverless cars but it does seem like leasing an EV is going to be the standard way to have your own vehicle for the interim period. Charging points at the front of houses seem to be popping up all over our estate at the moment. 

sinbaadi

I've had a few leases and they've always been handed back with no issues.  

It's nice to own a car but some lease deals are too good to pass up.  Don't fixate on a particular model and start looking as early as possible.  Outgoing models particularly are discounted to lease companies in ways personal buyers could only dream of.

chillidoggy

I'm on my third leased Ford from a dealer in Ipswich. The previous two were handed back without any issues and there were a couple of dings here and there. I wonder if the leasing companies are hotter on this kind of thing? That said, as I mentioned earlier, my mate got caned by Mercedes. He appealed but got nowhere. Needless to say, he's not leasing another one from them.

goldtop

sinbaadi said:

Don't fixate on a particular model and start looking as early as possible.  Outgoing models particularly are discounted to lease companies in ways personal buyers could only dream of.

Well, the only reason I am considering leasing is that I am fixated on running an (b)EV for the next couple of years - Hyundai or Kia, almost certainly and there are only 4 models in total! The other makes do not interest me, or are extremely expensive.

But I have read the same point about leasing in general - the best deal may be a different car.

goldtop

So, I'm just reading the actual Business Contract Hire contract, and I come across this bit:

"If for any reason there is a change in the nature, method, time of levying, application or practice of taxation in relation to any tax, including VAT and also capital allowances and any other duties, levies and other like charges such that there is a reduction in our after tax rate of return on the funds from time to time invested in this Agreement or a reduction in the net proceeds of sale of a Vehicle, then the Hirer will, if called upon to do so, pay by way of additional Rental plus VAT, an amount which gives Us the same amount of return as if such changes had not occurred. Our determination of any additional Rentals required pursuant to this clause will, except for obvious error, be conclusive and binding on the Hirer."

Now, I lack the imagination to predict what sorts of tax/etc may be levied on them and reduce their profit. But they obviously have more imagination than me, and see it as a risk, and they want me to bear it. With HMG likely to be trying to recover CV19 spending in the next couple of years, who knows what might happen.  

Or do I have the wrong end of the stick, and this is some standard risk-free clause?

strtdv

This is why I buy used cars and pay in full. You bear the full risk anyway so you may as well deal with that up front and at least then you're not being charged interest.
Plus, as you have pointed out, if you pick the right car you can essentially have cost free motoring.

m_c

goldtop said:

So, I'm just reading the actual Business Contract Hire contract, and I come across this bit:

"If for any reason there is a change in the nature, method, time of levying, application or practice of taxation in relation to any tax, including VAT and also capital allowances and any other duties, levies and other like charges such that there is a reduction in our after tax rate of return on the funds from time to time invested in this Agreement or a reduction in the net proceeds of sale of a Vehicle, then the Hirer will, if called upon to do so, pay by way of additional Rental plus VAT, an amount which gives Us the same amount of return as if such changes had not occurred. Our determination of any additional Rentals required pursuant to this clause will, except for obvious error, be conclusive and binding on the Hirer."

Now, I lack the imagination to predict what sorts of tax/etc may be levied on them and reduce their profit. But they obviously have more imagination than me, and see it as a risk, and they want me to bear it. With HMG likely to be trying to recover CV19 spending in the next couple of years, who knows what might happen.  

Or do I have the wrong end of the stick, and this is some standard risk-free clause?

It's basically for if the government changes any of the applicable taxes on the hire agreement. I.e. if they bump up VAT, you'd be liable for the additional cost.

chrisj1602

It’s worth noting that the government have just changed their grant terms and conditions.

You now get £2500 off an EV under £35,000.  Last week this was £3000 off an EV under £50,000.

That additional £500 or £3000 is going straight into the rental.

goldtop

m_c said:

goldtop said:

So, I'm just reading the actual Business Contract Hire contract, and I come across this bit:

"If for any reason there is a change in the nature, method, time of levying, application or practice of taxation in relation to any tax, including VAT and also capital allowances and any other duties, levies and other like charges such that there is a reduction in our after tax rate of return on the funds from time to time invested in this Agreement or a reduction in the net proceeds of sale of a Vehicle, then the Hirer will, if called upon to do so, pay by way of additional Rental plus VAT, an amount which gives Us the same amount of return as if such changes had not occurred. Our determination of any additional Rentals required pursuant to this clause will, except for obvious error, be conclusive and binding on the Hirer."

Now, I lack the imagination to predict what sorts of tax/etc may be levied on them and reduce their profit. But they obviously have more imagination than me, and see it as a risk, and they want me to bear it. With HMG likely to be trying to recover CV19 spending in the next couple of years, who knows what might happen.  

Or do I have the wrong end of the stick, and this is some standard risk-free clause?

It's basically for if the government changes any of the applicable taxes on the hire agreement. I.e. if they bump up VAT, you'd be liable for the additional cost.

Agreed and as we already know that HMG is definitely increasing Corporation Tax, that paragraph would allow the lease company to charge me for the difference. I think the VAT rise is definitely on the cards, but BoJo wants to delay it until he/we feel the CV19 pandemic's over.

@chrisj1602 On the subsidy change, the clause as-written doesn't allow for the lease company to claw back that £500. 

ICBM

I’m reading this because I had vaguely been thinking of going down the same sort of path, but to be honest it sounds like a complete minefield... and very expensive compared to my ownership model of buying a good used car outright and keeping it until it’s no longer economically maintainable.

Which is of course why the car industry want us all to switch to leasing.

I’ve typically paid about £5K for a car and got at least 5 years out of it, sometimes close to twice that, with maintenance costs of up to about £1K a year, but often less than half that. Probably about £1K a year on average. Can you even lease a car for that?

m_c

You wont get a lease for that.
The increasing benefit of leasing, is it removes the depreciation risk. If you're happy to have an older vehicle, that's not so much a problem. The issue is, would you be happy to have an older electric vehicle, and risk a major repair bill or the vehicle being uneconomical to repair?

I'm seriously considering leasing my next van, as nobody can really predict what's going to happen to used prices over the next 3-5 years.

strtdv

Leasing removes a little bit of the risk (you get a guaranteed minimum value at the end of the lease, though that is condition dependent and they can get a fair amount of money out of you if the car isn't up to scratch in their eyes), but the cost is still way higher than running an old car into the ground.

I wouldn't have an older EV at the moment, which is part of the reason I'm sticking with ICE cars while I'm allowed to.

Danny1969

I really want a Tesla model 3. There's one in my road and every time I walk past it I drool on it. It's just the most striking car around but I guess this will diminish as they get more popular. I wouldn't allow myself to have a petrol or diesel car, we already have one polluting car my wife drives. 

I've always just brought cars outright, normally high milage because I'm not afraid of repairs and servicing and high milage shaves thousands of the price. I brought an XJR once with 138K on it and put another 30K on it with no hassles at all. I brought my wife's car with 140K on it. I think this is probably the opposite of what you're meant to do though

I don't really get the leasing thing. I have loads of friends who pay £300 ish every month and then when the lease runs out they just get another car at £300 a month. You can spend 30K in 10 years and still not really own a car !

ICBM

m_c said:

You wont get a lease for that.
The increasing benefit of leasing, is it removes the depreciation risk. If you're happy to have an older vehicle, that's not so much a problem. The issue is, would you be happy to have an older electric vehicle, and risk a major repair bill or the vehicle being uneconomical to repair?

No, which is why I had been thinking about the leasing model. Electric technology is moving too fast at the moment to want to buy an older one.

It sounds hugely expensive compared to what car ownership is currently costing me though. Depreciation is almost irrelevant to me since I tend to buy cars in the second half of their value band and don't expect them to be worth anything at the end - so it's simply the purchase price divided by the length of ownership, and if that's less than a grand a year then I'm happy. That's for relatively large cars too, I needed them for work and family reasons, but both of those are changing now so I'm thinking of something smaller when the current one goes.

goldtop

I hear all of the points above - my cynicism is what made me post in the first place. Like @ICBM I have always bought older cars and run them long after most people would want to. (Since switching to Japanese cars, this has been a low-risk option WRT breakdown and repairs, and £5000 of Lexus is still a great car to be in; run it for 3 years and sell it for £3000.)

But, I want to switch to a bEV, but those on the market at the price I would buy (typically £5000) are not great. And the leasing figures do make sense - I will spend less over a 2-yr lease than on running the current petrol hybrid. I could spend more - £15000 on a much newer bEV, but then I'd most likely be losing on depreciation.

It's that annoying bit of small print that's making me doubt. What it says seems quite clear, regardless of normal leasing practice. We are not in normal times. I will call the leasing co with my concerns and report back...

chrisj1602

goldtop said:

m_c said:

goldtop said:

So, I'm just reading the actual Business Contract Hire contract, and I come across this bit:

"If for any reason there is a change in the nature, method, time of levying, application or practice of taxation in relation to any tax, including VAT and also capital allowances and any other duties, levies and other like charges such that there is a reduction in our after tax rate of return on the funds from time to time invested in this Agreement or a reduction in the net proceeds of sale of a Vehicle, then the Hirer will, if called upon to do so, pay by way of additional Rental plus VAT, an amount which gives Us the same amount of return as if such changes had not occurred. Our determination of any additional Rentals required pursuant to this clause will, except for obvious error, be conclusive and binding on the Hirer."

Now, I lack the imagination to predict what sorts of tax/etc may be levied on them and reduce their profit. But they obviously have more imagination than me, and see it as a risk, and they want me to bear it. With HMG likely to be trying to recover CV19 spending in the next couple of years, who knows what might happen.  

Or do I have the wrong end of the stick, and this is some standard risk-free clause?

It's basically for if the government changes any of the applicable taxes on the hire agreement. I.e. if they bump up VAT, you'd be liable for the additional cost.

Agreed and as we already know that HMG is definitely increasing Corporation Tax, that paragraph would allow the lease company to charge me for the difference. I think the VAT rise is definitely on the cards, but BoJo wants to delay it until he/we feel the CV19 pandemic's over.

@chrisj1602 On the subsidy change, the clause as-written doesn't allow for the lease company to claw back that £500. 

Sorry, I didn’t mean they could reclaim. I am not sure where you are up to with an order but if you’re car is not yet on order then then grant could be different.

If you had a quote for a car sub £35k car up to the 17th, the grant would have been £3,000, 18th onwards only £2,500. Crudely calculated, that’s £21 a month increase in lease costs over a 24 month agreement. If the car is £35k-50k then then £125 a month increase.

I work in the industry and it has caused chaos.

chrisj1602

In relation to tax increases, this is likely to be road fund licence, which is built into your rental but if it increases £5 or £10 in the budget you’ll probably get a one off invoice invoice annually to cover the increase.

ICBM

goldtop said:

I hear all of the points above - my cynicism is what made me post in the first place. Like @ICBM I have always bought older cars and run them long after most people would want to. (Since switching to Japanese cars, this has been a low-risk option WRT breakdown and repairs, and £5000 of Lexus is still a great car to be in; run it for 3 years and sell it for £3000.)

I'm not even sure why most people wouldn't want to run them that long - my 10-year-old/100K Renault is fine, it's reliable and in quite nice condition. MrsICBM's Suzuki is nearly that old - although with less than half the mileage on it - and it's a really nice car. Both one-owner from new, both higher spec, both from independent dealers, both with warranty, neither actually exceptionally cheap for that model/year, but good examples which was the whole point of buying them. The Renault has only needed a couple of repairs - neither big or expensive - in the three years I've owned it, and the Suzuki next to nothing in four.

I would like an electric or a hybrid of some sort when the Renault needs replacing - and I still hope to get another few years out of it - but given what's said above I just don't think the economics stack up yet even if I want something a lot smaller than a Scenic.

sinbaadi

If you have no need for the reliability and warranty of a new car, or a wish for it to be new and have all new bits on it, then I would certainly agree that leasing is, at face value, unnecessary.

Leasing and used car ownership are both minefields in and of themselves, but I have had a much less stressful time running new cars on lease agreements than I have had with some of the used cars that I have run.  I'm on a car scheme with work so I have to have something of a maximum age, but I'm considering buying rather than leasing next time.   Ultimately though it's a numbers game.  A nearly new car with manufacturers warranty on it, for the right net monthly cost after maintenance, consumables, depreciation?  Sure!  But if there's a lease deal which gets close to that after 2 years, I'll take the brand new car (sorry to the environment).

Lease companies can secure deals that a private consumer can't get near.  

goldtop

I spoke to the leasing company today, and the advisor #1 said "no idea" and advisor #2 said "that's just for road tax on the car" and that she will send confirmation in writing on that.

So, it appears I was worried about nothing more than the overly-general wording.