Buying a Second Hand Car v Leasing

Buying a Second Hand Car v Leasing – What You Should Do

Buying a Second Hand Car v Leasing – What You Should Do

The age-old debate on if it’s better to buy or lease a car will always rumble on, there are supporters for both sets of arguments

We are however going to look at it from a slightly different perspective

At Car Flipping 101 we prefer to buy our cars (doesn’t have to be cash) over leasing them, the reason being we can get to drive beautiful cars which have already taken the majority of the depreciation hit.

We’re not talking about normal cars, we are talking about the top of the line luxury models such as the BMW M cars, the Audi S cars, the Range Rovers and Maserati, cars which would be almost unaffordable to ‘Joe public’ if they were to lease them.

We can get these cars for the same cost, and often much lower than the cost of a lease payment for a new base model car.

Let’s talk about this a little more

What is Leasing a Car?

Car leasing is in effect long term rental of a car, the average time of a lease agreement is around three years however it can be shorter or longer depending on your needs. There is usually a set monthly payment for the car which runs the length of the contract.

A big benefit of being able to lease a car is to be able to select your make, model and trim level often from new and you are able to select your own options and upgrades you wish to include.

The monthly payment will be dependant on all of these factors and as a rough guide, the more extras you choose means the more you will pay each month. Often but not in all cases extras such as Servicing, Road tax and insurance for the length of the contract may be included.

It’s worth knowing the car belongs to the finance company till you have settled the outstanding debt on the vehicle.

How do You Lease a Car?

You will often have to stump up a deposit which normally equates to a few months worth of payments followed by fixed monthly payments till the end of the contract. There may be a further ‘balloon’ payment to be made at the end of the contract if you wish to own the vehicle after the lease has expired. You can return the car back at the end of the agreement and either terminate the agreement or start a new one.

Benefits of Leasing a Car?

Leasing a car allows you to either pick a brand new or virtually brand new car and have it created to your liking.

Extras such as insurance, road tax and service costs can all be added into one monthly payment for peace of mind ownership.

Negatives of Leasing a Car?

There is usually mileage restrictions placed on every lease contact which can range from 6-12k miles per year, this means the more miles you think you will drive the more the monthly cost will be. Every mile you go over the agreed limited you will pay a hefty premium usually per mile.

Base model cars are usually poorly equipped and every additional upgrade tens to be very expensive. It’s not uncommon to be paying £500 + per month for a heavily optioned car.

Depreciation is perhaps the biggest negative of car leasing, a new car tends to lose 15-35% of its value in the first year and then 50% or more of its value once it hits the three-year-old mark.

So to visualise this you could have leased a £40,000 car after options for a 4 year period. After the third year, the value of the car would have plummeted to £20,000 yet you will still need to continue to pay the monthly payments based on the original £40,000 value.

What is Buying a Car?

May sound obvious, but it’s having complete outright ownership from day one, Buying a car doesn’t have to exclusively be your cash, and can be purchased by a low-interest bank loan. Being a ‘cash’ buyer puts you in the position of being able to choose where you buy your car from be-it a dealership or privately.

Benefits of Buying a Car

Your not restricted to any mileage limitations and not tied into any potentially expensive monthly payments. If bought correctly the car would have taken its biggest hit of depreciation and will devalue slower from that point on,

Again if bought correctly you can get optional extras that once someone paid thousands in extras for included in the low purchase price.

Negatives of Buying a Car

Unless you opt for a private warranty and service plan all the maintenance and upkeep is down to is down you

There are far fewer rights covering ‘private sales’ and ‘sold as seen’ tends to generally mean just that. The longer you keep the car depreciation will tend to bring the value down over time to virtually zero

Stumping up a large amount of cash in one go can seem daunting for some, hence they opt for leasing instead.

You will need to know how to correctly inspect a car if you are purchasing it privately as you are more likely to come across some very suspect vehicles being sold for the wrong reasons.

Check out our article on scams to avoid when buying a secondhand car.

Buying a Second Hand Car v Leasing – What You Should Do

What do We Think is Best?

In our opinion buying the right car for the right price wins every time over leasing

Our ethos here at Car Flipping 101 is to buy a car no newer than around 5 years old once all the major depreciation hits have happened, you can often pick up cars for 50-70% off the original sticker price depending on the car.

We don’t just look to purchase any car, instead, we look to purchase the best model and spec at the correct mileage range, keep it for a relatively short amount of time (1-6 months) before flipping it on before depreciation can catch us. We often look to profit on all flips however at least we look to break even on our investment which technically means we have driven the car for FREE,

Would you pay £250 per month for a base model BMW 3 series or would you rather drive a 5-year-old Maserati Gran Turismo which was once worth £100,000 + and still looks like a supercar for the same monthly price?

We call this our car flipping for fun and profit method.

We have a whole list of resources which can help you start to understand this process much better.

Be sure to check out our other articles which talk about how to correctly value a car and dives into more detail on how depreciation is your friend.

Conclusion

There will always be those who will still opt for leasing a car because the process is more ‘ user-friendly’ which is completely fine. We do not want to discourage you from doing this if you feel this is what suits your circumstances the best.

However this article just looks to highlight the pros and cons of each method and then provides you with our rationale as to buying cars the way we suggest allows you to drive more quality cars whilst protecting your investment, the choice ultimately is still yours.

Comments

  1. Author

    Hey Micheal

    If you follow the short flip formula you can get in and out of a car without having to spend anything on maintainece, we definitely suggest a pre purchase inspection and using our guide on ‘how much to pay’ to have a ready made price buffer built into the car

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