I am deciding whether to operating lease a new car, but want to know any hidden costs or any potential problems when unforseen circumstances happen! As it's quite a big commitment to go into a 45 months contract.
Let's say if the lease cost roughly $600/month, and terms is for 45 months, but I want to break it when only 18 months through, what sort of break fee I need to pay! Just want to get an idea.
Fully-maintenance vs non-maintenance! Should I also include insurance or get that myself! Anyone can share their experience!
Thank you!
neo_psy,
Jul 10, 9:59am
Yep - this.
Plus pricing in terms of non-maintained etc.
Mate of mine who leases all his cars gets maintained minus tyres (dunno what it's called) and deals with insurance himself.
e_c_78,
Jul 10, 10:10am
thx, but I just wanted to get a rough idea, $800, $2k, $5k, $10k! must be someone who's done it and know how much we talking about here.
supernova2,
Jul 10, 10:16am
Can someone explain in simple terms why lease!Surely you still spending money so why not just buy the car in the first place.
socram,
Jul 10, 10:38am
I have never believed that overall, leasing works, but a lot depends on the distance you travel and the value of the vehicle.It may work better if you are covering a really high mileage, then get to a stage where things start going wrong in which case, leasing comes into its own.
At $600 for 5 years, you have paid out $36,000 and have nothing whatever to show for it.So what is the residual value of that vehicle!
3beers,
Jul 10, 11:13am
For memory with an operating lease once you sign the dotted line thats it . you are legally obligated to how ever many months you have signed for . and given the current economic climate the lease company will do every thing they can to keep you in it . better option is a Finance lease . very similar to a hire purchase but with better tax options and advantages .
In saying that
SPEAK TO YOUR ACCOUNTANT ! THATS WHAT YOU PAY THEM FOR
e_c_78,
Jul 10, 11:57am
Because unlike houses, cars depreciate in value, especially with brand new cars, so with leasing, all your costs, including depreciation, are known. You can also avoid having cash tied up in a depreciating asset and put it to productive use. It's particularly good for businesses, and for people don't have a lot of cash upfront but still want to drive new cars.
tonyrockyhorror,
Jul 10, 12:21pm
"Don't have a lot of cash upfront. but still want to drive new cars". I can't help but see a fairly obvious link from the latter to the former.
tonyrockyhorror,
Jul 10, 12:22pm
They've got that well and truly covered with heavy costs for higher mileage lease terms.
supernova2,
Jul 10, 12:23pm
You have assumed that the car will be purchased for cash up front.Depreciation actually cost nothing in terms of cash. So you are suggesting that it is better to commit to say 800 per month for 5 years ($48,000) and own nothing than to borrow say $30,000 and pay that off over 5 years (about $38,000) and still have something that perhaps might be worth $20,000.Looks like a good way to burn around $30K .The only ones winning are the lease companies.Clearly they wouldnt do it if they werent making a killing out of the deal.
e_c_78,
Jul 10, 12:54pm
You can't lease a car for 5 years, maximum is 45 months, so $600 for 45 months. The car RRP roughly $37k-$38.
Yes, if I have the cash I would buy up front, but problem is I don't, so let's do some quick maths: If I get finance for $37,000, with a 42 months term, I end up with roughly $1,310 per month commitment. Total = $55020 With lease, I pay $600/month for 45 months. Total = $27000
So after 3.5 years, the car would be worth about what! $20k if I am lucky! so If I sold it for $20k, how much did I really paid! 55020 - 20000 = $35020 as compared to $27000.
Plus, with the $600/month payment, I am putting it down as expense to my business, and also claiming full GST, as I run a gst registered business. With financing, I can't.
tonyrockyhorror,
Jul 10, 9:28pm
With finance you get ALL the GST back on the first return even though you haven't actually paid it all yet - the finance company has. Then you claim the interest paid in the year it's paid and the capital cost depreciation.
tonyrockyhorror,
Jul 10, 9:31pm
Only if you intend to flick it and buy a new one. You have to do that with a lease. you don't have to do that with a purchase. So the problem you're seeing is due to the short term you're looking at. If you get another 2 years out of the vehicle you purchase before it's worthless. that's 2 years of lease payments you've saved.
neo_psy,
Jul 11, 7:39am
OP, you'd need to call the lease company you're looking at. They'll probably tell you what their deal is.
Company I used to work for had new cars leased for directors, and 12 month old returned lease cars leased for managers - saved an enormous amount cos the lease for the used cars was based on the value.
Might be worth looking at that - new-ish car a bit cheaper.
craig04,
Jul 11, 7:46am
What sort of car can you lease for $600 per month for 45 months!
superdave0_13,
Jul 11, 9:05am
Yeah leasing is good for people with no money. Buy it out right with a bit of creditor finance.
e_c_78,
Jul 11, 10:07am
The new Peugeot 4008 compact SUV, it's roughly $619/m gst inc, but I am claiming the gst part, so I am basically paying $539/m for it. I've done all my maths and just can't find a better deal. I get to sell my old car and get the capital out of that which I can put into my business etc., it's a no brainer really.
supernova2,
Jul 11, 10:35am
Without being rude the "no brainer' is don't buy something you can't afford.There is something seriously wrong with a business when you have to sell assets to put capital into a business.Have you ever thought that you are now spending say $600 a month on nothing but an image and that is $600 per month that could stay in your business bank account.As far as i can tell the only time you should commit to spending money you dont have is to obtain an asset that is REQUIRED to make money.In the case of a car - and in your example a Pug SUV (of all stupid things) - i can see absolutley no reason whatsoever why it would be required to operate a business.
supernova2,
Jul 11, 10:37am
+1Looks like the poster with the SUV has no real idea of how business accounting works!
jason18,
Jul 11, 11:32am
I don't get why businesses have to have these flash cars that they don't own and at the end of the lease they can't sell em Why not buy say a later model mondeo or similar that looks the part and is a hell of a lot cheaper. I don't and never will understand why people lease.
e_c_78,
Jul 11, 11:45am
lol, pointless arguing about this really, all personal preference. So say if I don't lease, i sell my old car, put it as a deposit into a new car, I still need to HP the rest of it which might be even higher than $600/m, so less cash flow for my biz. Plus no capital left to inject into my biz for marketing/growth, well I could borrow more money, which result in paying more interests and more outgoing.
jason18,
Jul 11, 6:17pm
.
Do you need an expensive car tho!You want more money for business so why not spend less on a car!
stevo2,
Jul 11, 6:28pm
3 words. Image Image Image !
tonyrockyhorror,
Jul 11, 9:41pm
And the WANT overriding the NEED.
socram,
Jul 11, 9:56pm
Interesting aspect is of course the depreciation.Whilst most cars lose a packet the first year then steadily less, I now find myself with a ten year old car with low mileage.
Firstly, as pointed out earlier, I got the GST back on $50,000 straight away.I also got back 26% per annum on the residual value each year. Although accountant is due round shortly with this year's figures, I suspect that the car according to the book value, (that I could work out if I wanted.)Is now just under $3,000.
So what is a low mileage 2002 Cooper S worth!Far more than $3,000!I certainly wouldn't want to be paying $600 a month just to get a newer car that is for sure.
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