As we prepare to say goodbye to 2011 and usher in 2012, it’s always a good idea to plan ahead and set some goals for the next 12 months. One such goal might be to fund a new car – a brand-spanking new motor to start off the new year in style.
Planning ahead for a substantial purchase is always a good idea, especially in these times of tightened belts. It’s also important to get the most bangs for your buck, and looking at the car finance options open to you is one way to ensure that you get the best possible value for your money.
But what’s the most economical way of paying for a car via the various car finance options? Well, PCP and car leasing have become really popular payment methods in the UK in recent years. While some would see leasing instead of owning a car – as you would with PCP deals after a period of three to four years – as a disadvantage, there are plenty of benefits to a leasing arrangement that can save you plenty of money.
Firstly, car leasing allows you to avoid depreciation. The AA has published research which concludes that a new car loses 60% of its value in its first three years. In some cases the car can lose as much as 40% of its value in the first year of its life alone. So even though you don’t end up owning the car after the leasing period, you’ve saved yourself a huge amount of cash as you didn’t own the vehicle in the first place.
Leasing is a practice that has been familiar to business users for many years through contract hire packages. Fleet buyers now lease cars under contract hire deals that allow them to keep expensive assets and depreciation off the company books, and give them the freedom to update the fleet every few years at a much lower cost.
Another great advantage of car leasing as a car finance option is the ability to get your hands on a more prestigious car for less money. Quality cars such as BMW’s and Audi’s don’t depreciate as much as others, meaning that their monthly payments under car leasing arrangements can be over half the amount they would be if you bought one through a personal or business loan.
If you bought the car using a loan, you’d not only have higher monthly payments, but at the end of the loan period you may have a balance to pay off while owning the car outright. This will mean that you’ll have the car to keep, but you’ll have suffered at the hands of depreciation.
The third advantage of car leasing is the convenience. You can apply for the lease online, you normally get road tax included and maintenance bills are covered by a manufacturer’s warranty for typically three years or more. Once the leasing period is up, you hand back the keys and upgrade to a new model, so you don’t have go through the inevitable hassle of trying to sell the car on.
Tags: Car finance options, car leasing, contract hire, PCP deals