Car finance: is leasing the model choice?

To lease or not to lease. That was the question that kept me awake for many nights last autumn.To get more auto finance news, you can visit shine news official website.

The vehicle under debate was a black Jeep Renegade Longitude, which my American wife wanted because it would remind her of her native California when she felt homesick.
Plunging into the realm of car financing, however, is a daunting experience, with a range of options that can leave even the financially literate scratching their heads. As the auto industry creates new ways to pay — and keep their vehicles rolling off the production line — Britain’s car buyers increasingly find themselves navigating a world of acronyms, interest rates, incentives and payment plans. One answer that is growing in popularity is leasing. Would it work for us? And what would it cost?

Our dilemma first emerged in last August, when a reminder from Fiat Finance fell on the doormat alerting us that the four-year personal contract purchase (PCP) deal on the Fiat 500 would end in December.

Under PCP — the most popular form of car financing in the UK — we would have three options: pay a final balloon payment of £4,522 and own the car, apply to refinance the balloon payment subject to credit status and extend our contract term or void the balloon payment altogether by upgrading to a new car and — here was the catch — exclusively within the Fiat Chrysler group.

No, they said. We were not contractually allowed to sell the car until the balloon payment had been made and we had taken legal ownership.
Seeing in cold black ink the full payment we’d need to make — £5,039 — my wife could suddenly think of far better ways to spend that money, starting with the shoes and earrings she’d just seen on Outnet. With a quick “Add to basket”, the decision to dodge the balloon payment and upgrade within Fiat Chrysler had been made.

Some still prefer an outright purchase. Helen Pilkin, a mother of two who bought her used Audi Q5 in cash, said: “I wanted to feel I owned it. I’m a contract-phobe and my brain combusts when I have to sign paperwork, as I don’t trust anyone. I know nothing about cars and actually walked out halfway through the paperwork and went back the next day as I was so overwhelmed.”

We decided against hire purchase, a self-financed loan or cash and in November 2015 signed a PCP contract with Motor Village Marylebone for a term of 48 months. This constituted a £950 upfront deposit, credit of £11,920 through Fiat Financial Services at an interest rate of 3.1 per cent APR, 47 fixed monthly payments of £179 and an optional balloon payment of £4,522 (also known as GMFV or guaranteed minimum future value) due at the end of the contract in December 2019.