The COVID crisis has impacted the finances of almost everyone in the country and is reshaping how people commute and travel around.
Do you brave public transport or is now simply the right time to finally get a car?
John Wilmot, CEO and founder of car lease comparison site LeaseLoco, has five tips to get you on the road.
Use, don’t own
Subscriptions are taking over the way we manage our lives, and finances. Whether it’s music, films, razors or tasty meal boxes, it’s just more convenient and often cheaper.
Cars used to be a costly outlay but enter the invention of PCP finance deals (Personal Contract Purchase) many years ago, and the cliched ‘second most expensive purchase in your life’ suddenly became an affordable proposition on manageable monthly payments.
So, what’s the issue? Well, apart from heavily publicised mis-selling of PCP loans, leasing a car is almost always cheaper.
When was the last time you watched a DVD? Just like Netflix has killed owning DVDs, leasing is quickly killing owning your car.
With a PCP, you still own it, still have depreciation worries, and still have the possibility of negative equity throughout the term. With leasing, this disappears completely.
Chase the deal, not the car
You want an Audi A4. However, lease prices are hugely volatile and although that A4 you want has been £300 per month, they’re now sitting at £450 per month for exactly the same car.
Market factors are getting in the way, making your target car poor value to lease. Just bad timing. But a BMW 3 series with a similar list price could have been £400 per month yesterday to lease and is now £300 per month.
And the top trim M Sport could even fall cheaper than the base trim level. In leasing, it’s not uncommon for £40k list price cars to be as little as £300 per month with no deposit, when the equivalent PCP deal could be more than double that.
So that Audi A4 you were set on suddenly makes no sense, but you’ll be grinning ear to ear by taking the BMW knowing how much you’ve just saved over the PCP deal.
Less is more
With contract terms, size matters. Short contracts are more likely to be a car subscription service, which might work for you given that one-month rolling contracts can give you enhanced flexibility.
But with that flexibility comes additional cost. This can normally be up to 50% more than a regular lease, and often can involve a second-hand car due to the more difficult logistics of companies trying to manage short term contracts across their fleet.
Typically, a four-year contract will give you the cheapest monthly rentals, but it’s not uncommon to see two-year deals at the same monthly price so it’s worth doing your research and hunting these deals out.
You’ve also got to consider additional maintenance costs in year four of being out of warranty, so make sure you’ve done your maths and calculated what’s going to work for you.
There’s mileage in every deal
All lease deals have a pre-agreed mileage, with the cost being built into the contract. For instance, 15,000 miles a year is going to have a higher monthly rental than 10,000 miles. So how do you manage this if you’re used to buying a car and the miles will be what the miles will be?
Granted that the hidden cost of that hits you in higher depreciation when you come to sell. With COVID, most people’s mileages are significantly down on the norm, so it’s worth considering buying less mileage and paying for it at the end of the contract, which can typically range from £60-£100 per 1,000 miles over for an average executive car – and is not really what some of the scare stories will have you believe.
It’s also worth noting that you can renegotiate your mileage mid-term at a rate per mile lower than any end of contract charges. So, when circumstances change in the current uncertain climate, there’s flexibility either way.
Track the market
Whether you’re buying a house or booking a holiday, you track the market, don’t you? Are things up or down today? When’s a good time to make the purchase?
Car lease comparison sites such as LeaseLoco keep track of deals and even have historical pricing, just like tracking stock market graphs, that really will bring out your inner geek.
It’s worth tracking the market six months ahead of when you expect to change your car, so you get a feel for pricing in the market.
You’ll spot the volatility, and maybe even a pattern in pricing. If you don’t see any patterns, keep track of your desired car and when the price drops, you’ll be notified.