Let's have your thoughts then brain boxes

[Franky Four Fingers]

Im in the motor trade and have been for many years but I know very little about personal Vehicle leasing. I'm trying to get my head around this but my brain power over the last few days is a little jaded.

So I have a 2 year old car which is currently worth circa £16000 (we buy any car quote confirmed) perhaps a little more if I were to sell privately. The car is entirely mine and nothing is owed on finance.
A 4 years old version of my car is currently worth circa £8000, roughly half of what mine is worth today.

I've looked in to personal lease/ hire and I can get a new car from anywhere between £250 and £400 dependant on model which would include a service plan. The lease would run for 2 years and then I have several options but I would probably chuck it in for another.

I'm thinking I'm going to lose in the region of £8000 in the next few years what with depreciation on mine so if you were to spread that loss over 2 years it's roughly the same cost as a personal lease.
So am I being really stupid to sell mine, split the cash between me and the missus and put it in 2 ISA'S and then take on a personal lease or am I better to let my car run until it's worth naff all squared?
I hope you understand the question and also hope it's not so amazingly stupid that I'll get the piss ripped out of me.

FFF

[TaketheCannoli]

I understand the question and have no desire to piss rip. I guess the answer depends on your ability to pay the monthly payments but assuming you can without concern then yes, I'd put the £16k in two ISAs where it'll be gaining interest on the whole amount from today. That £16k will grow over two years however it would lose at least half over the same period if you keep the car.

If you didn't sell it and started paying £400 a month into your ISAs then it would gain significantly less interest obviously.

So in your shoes, if I could afford the payments, I'd ditch your current car and get the money working for you. Oh, you also get a new car out of it - bonus.

Hope this helps.

David

[Franky Four Fingers]

I understand the question and have no desire to piss rip. I guess the answer depends on your ability to pay the monthly payments but assuming you can without concern then yes, I'd put the £16k in two ISAs where it'll be gaining interest on the whole amount from today. That £16k will grow over two years however it would lose at least half over the same period if you keep the car.

If you didn't sell it and started paying £400 a month into your ISAs then it would gain significantly less interest obviously.

So in your shoes, if I could afford the payments, I'd ditch your current car and get the money working for you. Oh, you also get a new car out of it - bonus.

Hope this helps.

David

Yes it does thanks, I could go up to £500 a month but I dont really want to go anywhere near that as it's nice to have a larger safety net. You've kind of confirmed what my dumb arse brain was thinking.

[Dave+63]

I did a similar calculation recently and came to the conclusion that, in general, for a c£15k car, the overall cost of running a leased car is likely to be less than an owned car.

I did the calculation over three years; if you keep a car for longer then owning becomes the cheaper option.

[SimonH]

The easy answer is if it depreciates lease it, if it appreciates buy it. Which is what I do effectively.

But...if I didn't do big miles I'd buy a cheap low mileage older car and let someone else pay for the depreciation.

[kk]

I did a similar calculation recently and came to the conclusion that, in general, for a c£15k car, the overall cost of running a leased car is likely to be less than an owned car.

I did the calculation over three years; if you keep a car for longer then owning becomes the cheaper option.

Agreed. I generally get 5 years out of a car - it's all about the horizon you are prepared to live with. Over 2 years your strategy looks good, over longer, less so.

Also keeping the car you own gives you flexibility - to do as many miles as you like and not worry about the leasing cost impact, or to save or not save in any given month depending whether you have a different use for the money.

Only you can make the call but in your shoes with my lifestyle preferences, I'd keep the car for another few years, and find another way to save.

[Franky Four Fingers]

Agreed. I generally get 5 years out of a car - it's all about the horizon you are prepared to live with. Over 2 years your strategy looks good, over longer, less so.

Also keeping the car you own gives you flexibility - to do as many miles as you like and not worry about the leasing cost impact, or to save or not save in any given month depending whether you have a different use for the money.

Only you can make the call but in your shoes with my lifestyle preferences, I'd keep the car for another few years, and find another way to save.

I'm currently not that worried about the mileage stipulation as we only do around 7000 a year so Im fairly confident I wouldn't get hit with excess mileage. Your comments about being flexible month to month wasnt something I've considered though. Like I said I generally have an ok safety net but I guess keeping it a bit biggers not going to be a bad thing. Thanks for your thoughts.

[Saint-Just]

I agree with kk.

From a purely mathematical viewpoint leasing is a better option.
But £400/ month over 2 years is £9600, and the amount of interest your £16k will have earned in this time is less than £380.
Except, that you are tied in a leasing system after 2 years, and that the math for the renewal will not work a second time.

[Hammond]

Except, that you are tied in a leasing system after 2 years, and that the math for the renewal will not work a second time.

What he said. Everyone seems to be ignoring the fact that, while your current car might be worth half it's value in 2 years time, it will still be your car. You'll still need a car, and you will still have a car, and it will be entirely yours. The 2 years after that it won't reduce in value by the same amount so as Saint-Just says, the maths for leasing will no longer work and you'll then either need to fork out to buy another car or continue leasing again. That's likely to blow away anything you've earned from the ISAs in one fell swoop.

I vote keep the current car.

[MB2]

The monthly payments are cheap when you lease as you aren't financing the entire car just the depreciation for the duration of the contract.

I do get why people lease as it allows you to drive a "better" car for the monthly cost without worrying about unexpected costs.

However you are effectively hiring a car and so will have to continue making the payments ad infinitum until you either no longer need a car or decide to make the end payment to keep the car. On the plus side you get a new car ever few years.

I do get that any car depreciates and with ownership you don't see that depreciation on a monthly basis but if you have the cash a 3 year old car bought outright should always provide the lowest acquisition costs.

[westberks]

With the personal leasing try and be flexible on vehicle choice as their are usually some run off specials or target specials.

I ended up with 5 series saloon because of the above. Dealer had a target to hit and offered a few pre specced cars at a great price, ended up at £380 PCM for a car that was £550 elsewhere.

The leasing gets very dear when you start to spec a car, the extras (as you know) are worth bugger all, so you effectively pay for it in the monthly. Metallic might be £600 as an option but will add £25 to the monthly, and suddenly Car not looking so cheap

[Franky Four Fingers]

Thanks for all the replies so far.