An unusual set of circumstances are contributing to there having never been a better time to lease your vehicle. Despite messages of prices on the rise in many sectors, the reverse is true in car leasing, and you can now get more for your money than ever.
Let us explain more
Today’s unusual economy and market conditions are affecting the motor industry with many shortages of vehicles being widely reported. The knock-on effect of this is that manufacturers aren’t offering any good deals at the moment – why would they? – and a good choice of cars is hard to come by. These shortages are, in turn, affecting the used car market where prices have increased considerably due to a lack of supply and an increased demand.
It’s strange then, that we are telling you that prices and the value to be gained by leasing a car are better than ever. How is that possible?
It’s all to do with the way we calculate lease payments. When you lease a car, you are effectively paying a little for the use of the vehicle, maybe some for maintenance and wear-and-tear, and some for depreciation. Depreciation is the difference between the price of the car when it’s new and you first lease it, and the value of the second-hand vehicle once you’ve finished your leasing term. The difference between these values is the depreciation. However, at the moment, for the reasons outlined above, this difference is not very much because the prices of used vehicles has spiralled.
It therefore adds up that the depreciation element of the leasing costs is lower than usual which has contributed to prices being far more competitive.
It could be these conditions that are behind a rise in the leasing sector following ten consecutive quarters of decline. Gerry Keaney, Chief Executive of the British Vehicle Rental and Leasing Association (BVRLA) said “The leasing sector continues to remain resilient in the wake of the global pandemic, with a pattern of growth feeding a sense of optimism amongst members.” (Source: fleetnews.co.uk)
It’s easy to see why he’s upbeat. At a time when purchasing a car is more expensive (Autorola UK reports that used diesel car prices have risen for the third consecutive quarter) and means less choice, the leasing option is actually heading in the other direction.
And finally, if you do need to compromise a little on the exact vehicle you want, it’s not forever and you can ride out the shortages knowing you can replace your vehicle much more quickly than you’d want to if you’d invested in purchasing a car.