Why leasing a BMW, Mercedes, Porsche, Range Rover or other prestige car can make sense
23 November 2019
Alongside our car sales business which continues to thrive after over sixteen years, Leama Specialist Cars is, like many other dealerships, brokers and other automotive firms, experiencing increasing demand for leasing luxury, prestige, sports cars and 4x4s through business and personal contract hire (PCH). Personal leases swelled by 24% during the 2018 calendar year, with BVRLA and SMMT data throughout 2019 highlighting again how the sector continues to buck the trend when it comes to new car registrations in the UK. Premium brands’ cars are understandably highly desirable and analysts forecast a 12.6% growth in the relatively exclusive luxury car segment over the next half a dozen years.
Influences behind personal car leasing’s growing popularity
Some voices have attributed Brexit as a factor shaping the growing general appetite to lease, while many fleet management businesses cite rising company car benefit in kind (BIK) tax rates, the introduction of the 4% diesel surcharge and the reshuffling of CO2 bandings on the back of WLTP’s arrival as influences behind the more recent shift from company cars to personal leases.
The trend from owning towards using
Specific stimuli such as these will always come and go, but developed societies as a whole are increasingly turning towards ‘usership’ rather than ownership, with cars very much included. Many people are now used to paying a relatively small upfront amount followed by anything between twelve and twenty-four months’ worth of payments to enjoy the latest Android and Apple smartphones, compared to a comparative few who buy a handset outright. Similarly, DVDs are fast fading away, replaced by watching films through the likes of Netflix. Consumers are even increasingly opting for ‘subscription’ when it comes to food, with a Royal Mail report anticipating the meal box market to proliferate by 75% by 2022, having already attracted 27% of the operator’s UK customers, especially the under-35s. Even wealthy businesspeople and personalities such as footballers and managers often rent their properties and lease their cars – and there are clear reasons behind this.
The commitment of buying a car
While all of the used vehicles sold by Leama Specialist Cars are hand-picked, meticulously checked and prepared, and are often ones their current owners originally sourced from us hence providing the utmost confidence in their provenance, it’s true that the majority are over three years of age and therefore require an annual MoT. With the manufacturer’s warranty provided by most German and other OEMs expiring after a similar length of time, it’s typically recommended that a robust third party or ‘aftermarket’ warranty is obtained when buying a used vehicle.
Advantages of a car lease
Car leasing, or ‘contract hire’ as it’s formally know, immediately negates these two considerations, as all lease cars unless otherwise stated are brand new vehicles, complete with a factory/dealership warranty and no need for MoT testing. Business and personal car leases can also be tailored to be even more worry-free by the addition of a ‘maintenance’ package, covering tyres, batteries and other consumables, along with breakdown and in some cases insurance.
The role depreciation and residual values play
Depreciation impacts new nearly all new cars and the majority of used examples, too, except for very rare classics, hypercars, limited edition models and other similar variants, regarded as collectors’ items and hence typically retaining or appreciating in value. Most other cars, including luxury, premium prestige, sports and 4x4 vehicles, gradually lose some of their value over time, their residual values affected by considerations such as the marque, age, condition, fuel type, number of previous owners, mileage, modifications, service history and market appetite. When the decision is made to sell a vehicle, it will typically command a lower price than it was originally purchased for, effectively losing the owner/seller money.
With business contract hire or personal car leasing, however, the customer isn’t responsible for advertising and privately selling or part-exchanging the vehicle at the end of the contract. Monthly lease payments predominantly reflect the car’s forecast depreciation and future residual value (RV), the customer essentially paying the depreciation in instalments over a small number of years, keeping within the agreed mileage or paying relatively small excess mileage fees if they exceed the allowance.
Considerations when leasing a car
Damage fees are charged at the end of a car lease contract if any chips, dents, scratches, interior stains, alloy wheel kerbing or other blemishes have been sustained during the contract that fall outside the guidelines permitted by the BVRLA, but especially with luxury, prestige and sports cars, customers typically treat them as carefully as they would if they owned the vehicles.
While it’s true that car leasing doesn’t enable a customer to benefit from any equity (resale value) when the time comes to return the car, PCH reduces the need to find a more substantial finance deposit that would be required in loan or PCP scenarios, making it more financially accessible to drive a brand new Audi, BMW, Mercedes, Porsche, Range Rover or similar vehicle.
Examples of prestige car lease offers
We regularly present car lease deals and offers to our customers on our website and social media, such as our recent specials on the BMW 330e M Sport plug-in hybrid for £411 per month, Range Rover Sport P400e HSE Dynamic hybrid for £677 per month and the Mercedes-Benz E220d AMG Line Edition saloon auto for £381/month, all including VAT. With these cars’ initial rentals set to 6 months and with free UK mainland delivery plus road tax included in personal leasing prices, the decision can make resounding sense for customers who need to retain as much capital in the bank as possible, avoiding larger expenditure while spreading their outlay through fixed costs.
How leasing a luxury car can stack up
As a luxury example, we currently have a 2018 Bentley Continental GT First Edition Coupe in stock with 5,000 miles covered and priced at £149,000. With finance set to a 36-month/3-year term with 10,000 annual mileage permitted, the default deposit presented is £14,900, with subsequent monthly finance repayments of £3,724.34. Leasing a similarly-specified W12 like this in line with the same parameters would entail an initial rental of around £20,000, which is slightly higher than on finance, but the monthly rentals would likely be in the region of £250 less each month and excess mileage can be secured for less than 3ppm, the customer able to simply hand the keys back and walk away after three years, with no concern over depreciation.
Wrapping up the buying vs leasing discussion
A credit check will be performed before a customer is accepted or sometimes declined for car leasing, but loans and other finance methods usually require good to excellent financial standing too, so there is little difference. Early settlement or termination is an option with many car lease agreements, but can often result in a one-off fee similar to if the remainder of the contract’s monthly payments are honoured.
For those who like to change one or more of their cars every few years without having to contemplate depreciation and for whom ownership isn’t important, car leasing is an attractive route to take. On the other hand, car collectors and customers who tend to keep their vehicles for several years or more tend to pay for their acquisitions outright - and Leama Specialist Cars’ stocklist can be viewed here.