These days, buying a new car comes with a minefield of finance options. Research suggests that many of us are choosing the personal contract purchase option, but why choose this over owning your car?
The latest figures from the Finance and Leasing Association show that 63% of people who took out dealer finance to pay for a new car between November 2011 and 2012 chose a personal contract purchase scheme, rather than a hire purchase deal.
The figures also show that more than £9bn was spent on new cars bought from dealers in the 12 months leading up to November 2012 – £2bn more than the 12 months before that.
A car is your castle
It seems to me that the boom in leasing is one reason why new car registrations topped the two million mark last year – the first time since the recession hit in 2008. But it also means that people aren’t necessarily buying cars any more, they’re simply borrowing them. To a dyed-in-the-wool car enthusiast (like me) who’d love nothing better than to own a modern classic (Mazda MX-5, Porsche 911, Lotus Elise), this feels totally wrong.
A few years ago, I remember a psychologist from the breakdown company AA explaining the main reason behind road rage was that, once cocooned in their car, people believe they’re in their own personal castle. You could say it’s like your home, but on wheels. But how can your car be your castle if you’re just borrowing it?
Another reason I’m not an advocate of leasing is the hefty payment that comes at the end of the term if you decide to buy the car. On top of that, you usually have to agree to an annual mileage figure up front when you take out the lease. If you exceed that figure and decide to return the car at the end of the term, you’ll usually be charged excess fees to cover it.
Buying over borrowing
At present, both my 15-year-old son and 12-year-old daughter are eyeing up my slightly ragged 2007 Renault Modus, hoping to take the keys off my hands when they reach 17. And I’ll be quite happy to pass the car on to them to learn to drive. By then, it’ll be seven years old and worth very little. Also, knowing its full history, I’ll be more reassured it won’t break down or develop a costly fault that might leave them stranded.
But if I leased cars instead of buying them outright, it’d be a distinctly different story. I’d worry about them damaging my car, because its value at the end of the term can easily be knocked down by a dent. On top of that, insurance would probably cost more on a more valuable car.
Getting with the times
Maybe I’m a bit of a dinosaur. After all, owning a shiny new car would be far more affordable on a personal contract purchase deal because monthly payments are almost always far lower than hire-purchase deals or loans, as you’re only paying off the depreciation of the car. Perhaps I should get with the modern age and let go of my attachment to car ownership.
Do you buy or lease your cars? Have you switched to leasing since the recession to cut down on motoring costs?
Do you prefer to buy or lease a car?
I prefer to buy a car (75%, 190 Votes)
I prefer to lease a car (13%, 32 Votes)
I prefer not to have a car (13%, 32 Votes)
Total Voters: 259