Since 1998, when I started the first website for our business of numismatics (coins), I have enjoyed using the internet for information, and also ensuring that our company provides good useful information and advice, free of charge, to potential consumers, whether buying or selling coins, or jewellery.
The first car we leased was a Renault Espace from 1994 to 1995. There were two main reasons for this, one was to conserve capital, the other was pure cost. The leasing deal was cheaper and better than owning a new vehicle.
How Did We Discover Leasing?
About a year before our Espace, one of our neighbours commented that one of the cars they were driving, a Fiat Uno, only cost them £37 per month. We cannot recall the retail price at the time, but £37 per month sounded a ridiculously cheap bargain. It wasn't until about a year later that we got round to asking how they got their great deal. They gave us the name of a local car leasing company, and sounded surprised that we didn't lease, and had not heard about the deals available.
Maths of Leasing
By the time we asked, the Uno deal was ancient history, our local man Steve said that his company had supplied several hundred of them to locals and more distant customers.
The new price on the Uno had risen to around the hundred pound mark, which apparently was fair value, the "proper price". Being naturally curious about these things, we asked how come the original deals had been so good. Steve explained that the banks and finance houses who finance or fund the vehicles use employ actuaries to calculate future retained vehicle values, taking into account age and mileage. These are then fed into spreadsheets together with the cost price, interest rate costs, and many other variables. From this, the funding company calculates the monthly rental or hire costs to meet its profit targets.
Manufacturers give various discount levels to major buyers, and dealers may have over-committed to volumes thereby having surplus vehicles to sell at a marginal loss in order to qualify for volume discounts on their entire period's purchases. Other factors affecting price may be guaranteed residual value levels at 2 or 3 year age levels, dependent on mileage. These may be designed to discourage the new cars being flooded onto the market too soon and depressing retail prices. Some of the discounts may be to keep production flowing ahead of anticipated or announced new models, or may be to stimulate initial sales of a new model.
Banks and other financial companies purchasing cars to lease can often charge full depreciation on their assets (stock) and obtain early tax relief. These savings are included in the actuarial calculations, and work through to the final price, saving the consumer money.
Whatever the reasons are mainly irrelevant to the consumer who simply wants to ensure the use of a decent vehicle at an economical cost. The combination of a big discount with a forecast or guaranteed high residual value can produce freakish results, and produce deals which are greatly in the favour of the consumer.
Our Leasing History
As we mentioned, we have been leasing since 1994, so have accumulated a dozen years of experience. We believe this qualifies us to share our insights with others. Although we believe that leasing will not suit everybody, it is well worth looking at.
Just a few of the deals we have enjoyed or missed.
Home - Car Leasing Advice Index Page