To Buy or to Lease?

The UK automotive industry is beginning to pick itself up from the dark financial times experienced in the last few years. Car sales have continually increased month-by-month for over a year and a half, the industry is currently one of the strongest in Britain and has become widely regarded as one of the key reasons we avoided a triple dip recession. Aside from purchasing new cars, hiring and leasing vehicles are becoming a particularly attractive proposition in the UK. At CarMax, we believe that now is the best time to take advantages of the strong car market, but what option is best for you – buying or leasing? 

Leasing

So what exactly is leasing? A lease is essentially a rental or hire agreement between two parties where a fixed monthly rate is paid during a set period – the length of time can vary from a few months to years. Once the leasing timeframe has passed, you simply hand the car back. It has been popular alternative to purchasing a car in the US for a number of years, but the appeal has increased in the UK in recent times.

This attraction can largely be attributed to driving away in cars that may be out of your normal price range, you often see BMW’s or Mercedes-Benz as popular choices when leasing cars. Furthermore, the leasing of cars enables you to drive a new car every couple of years due to returning cars once the leasing period expires. There are financial gains to make via leasing too, the monthly payments are traditionally more affordable in contrast to typical car finance options – however it is important to note that this does not always prove to be the case.

Buying

Research carried out by Which? looked at the cost of buying and leasing different car models, they found that traditional car financing options when buying a new car were still the more cost-efficient in most cases. This has been reinforced in the current high consumer confidence in the car market; sales of cars have recently hit a 5-year high – putting the UK automotive industry as one of the leaders in the wider European market. A large portion of the continued rise in sales comes from the various different car-financing options available.

Coming out of the rough financial times, the amount of people looking to use credit as a means of purchasing a new car has sharply risen to a record high of 75 percent. Car financing provides an easier and more beneficial means for the purchase of cars, however looking to secure the right financing package to suit you can still be an extremely stressful process. At CarMax finance, we specialise in offering excellent, affordable car finance regardless of your credit status. We hold the belief that everyone deserves the right to buy a new car; therefore, we are proud to assist you in securing bad credit car finance through our excellent service.

We acknowledge that leasing cars has its advantages; however, nothing beats the feeling of owning your own vehicle. Across the country many people are realising the incredible gains of owning your own car, the continuous growth of Britain’s motor industry over the last 19 months reinforces that purchasing your own car is still the more attractive option. Our car finance packages help with the considerable expense of a car, making CarMax Finance the only option to consider when buying a new car.

Car Financing Options for Retired People

English: Car Dealer, Eastern Avenue, Gants Hill (Photo credit: Wikipedia)

Most seniors who have been through car buying experiences in the past feel that some types of torture could be preferable to going through this process again. If the old clunker appears to be gasping out its last breath, however, it may be time to think through the financing options available and prepare for the car buying process in advance in order to make it easier. Basically, seniors have three options from which to choose if they have need of a new vehicle: buying with cash, financing the cost, or signing a lease agreement. The following information may be helpful to those trying to make the best decision concerning these choices: 

Paying the Entire Amount 

Seniors who have savings stashed back for a rainy day may find that using these funds to pay for a new car is actually cost effective. Interest rates are at record lows so the money saved from buying a car outright and not paying any interest could actually be more than the interest rate paid on any some savings accounts. Of course, if the dealership is offering deals that include payments with no interest added, it may be better to keep the money in savings and take a bit longer to pay for the car. 

Financing the Price 

Most retired people, concerned about keeping enough in their nest egg for emergencies or health problems, choose to make payments on a new car. When choosing this option, it is important to negotiate not only the price of the car, but also the terms of the loan. Seniors with a great credit score should get the best interest rates on the market so always know these rates before going to the dealership. It is also wise to check other financing options before signing on the dotted line. Sometimes credit unions and banks can beat the interest rates offered by the dealership, and people who negotiate with available cash often get a better bargain on the price of the vehicle. 

Signing a Lease 

Although leasing sometimes gets a bad rap, it may actually be the best choice for many seniors, especially those who are retired and live near family. Leasing takes away the need to worry about repairs because the car is always under warranty. Most cars can be leased with very little cash exchanged upfront, and most leasing agreements give the driver at least 12,000 miles per year before any penalties apply. Monthly payments on a leased vehicle, compared to those that must be made when the car is purchased, are almost always lower. 

It is important to know that whether a car is bought with cash or financed for several years, the owner will actually have some equity in the vehicle when he decides to upgrade to a newer model. This is not true of leased vehicles; however, many retired people will find the ease and convenience of leasing a car more than makes up for the resulting lack of equity. Impulse buying may be fun for some seniors, but when it comes to obtaining a new vehicle, planning and information can sweeten any deal. 

Melanie Lewis writes for a site that offers advice on automobile loans and has tips on things to consider before purchasing a new vehicle.

How Does a Novated Lease Work?

A novated lease is a type of car lease that an employer gets on behalf of the employee. The employee, in turn, pays for this lease with their income before taxes are taken out. Novated leases are incredibly beneficial for both the employee and employer, though of course there are certain disadvantages there as well. For jobs that need a lot of on the job travel, a novated car lease is likely the best way that the payments can be handled. 

How Does A Novated Lease Help The Employee?

With a novated lease, the employee never has to worry about making their car payments. The car payments are automatically deducted from their paycheque pre-tax. Not only does this mean they don't have to track the lease payments, but it also means that they can get a better car for less money because they don't have to pay tax on the amount. Employers also tend to have deals with automobile companies to lease cars by volume. That means that the employee has more savings because of the company's better rates.

Rather than other types of employer lease, the employee does keep certain rights over the car because the employee is making the lease payments. The employee gets more choices of car than in a traditional employee lease agreement, and the employee gets use of the car when they are outside of work. The employee can even keep their vehicle if they leave the company by transferring it to another company. 

How Does The Novated Lease Help The Employer?

On the employer's behalf, though the lease is financed through the company the employee still makes the payments. This means very little out-of-pocket cost for the employer. All the employer has to do is secure the lease, and manage the payments from the employee's paycheques. Because the employee is saving money on the lease, the employer can consider the lease a perk that the employee gets, and so save money on salaries.

Employers that need to have their employees travel during office hours save significant funds over providing company cars. Company cars would need to be purchased and retained by the company and not leased, or leased at a higher amount. The novated lease, by contrast, incurs no more cost on the behalf of the business. 

What Are The Drawbacks To A Novated Lease?

Because a novated lease is still a lease, the standard problems with this type of lease still applies; at the end, neither party will own the vehicle, which means that the employees are purely paying an expense and not gaining an asset. This said most novated lease companies will offer easy paths to ownership which will still work out as more cost effective for the vast majority of customers. This normally involves paying a fee at the end of the lease to purchase the vehicle outright

This article was written by the team at Novated by Fleetcare, independent Australian novated lease providers with offices all around the country.