The cheapest way to afford a brand new car

For many of us who run our own business, a car is our single biggest business cost. The good news is that in relative terms, cars are more affordable now than they used to be, even though they’ve obviously increased in price over the years. Flexible finance options undoubtedly help, and it’s probably the key reason new car sales have risen in the UK in recent years, proven by the high numbers being funded by some type of finance.

Some volume manufacturers say the majority of their customers use finance other than their own savings to pay for their new car. So what is the cheapest way to get behind the wheel of a brand new car?

In a word – leasing.

In general terms, you’ll likely find the leasing option for your preferred new car will beat other methods of finance in terms of what you’ll pay per month and lower deposits are required – ideal for those who want to keep some money back for emergencies or savings.

With leasing, you effectively hire the car for the length of the agreement – whether that’s two, three or four years – and simply hand it back at the end. You pay a fixed amount per month and a deposit of multiples of the monthly payment – three, six or nine months’ worth are common.

The leasing advantage

The great thing about leasing is its flexibility: within reason, you can adjust the initial rental, the terms of the agreement and the mileage you expect to cover to arrive at a monthly rental that falls within your budget.

It means you could be behind the wheel of a car you’d perhaps thought beyond your means. Prestige branded models such as Audis can be leased for very reasonable monthly payments compared to buying them on hire purchase, a PCP (Personal Contract Purchase) or personal loan.

Depreciation – the hidden expense when buying

A trump card with leasing, for private motorists in particular, is the removal of depreciation concerns. Depreciation is the single largest expense when paying for and running a car but it doesn’t bite until it’s time to change, and much of what influences depreciation is beyond the owner’s control. Yes, keeping the car neat and tidy, regularly serviced and covering a low mileage all help, but factors such as the car’s ‘desirability’ and reputation will primarily influence its resale value.

Leasing removes this concern in one fell swoop; you give the car back at the end of the term and it’s the leasing company’s responsibility to resell it. Assuming the car is in acceptable condition for its age and hasn’t exceeded the mileage agreed at the outset of the agreement, there’s nothing more to pay.

Experts say that new cars suffer their biggest drop in value within the first 12 months of ownership. After just one year, the car will be worth about 20% less than the purchase price. After that a new car will be depreciated by 15% to 25% every year until it hits the five-year mark. So, after five years, the value of your car will have lost around 60%. Try this simple car depreciation calculator to know how much your car will be worth after a different number of years.

Keeping up to date and low maintenance

You’ll save on maintenance costs since you’ll be running a newer car all the time; as soon as it’s three years old you can give the car back and start again with a brand new one. In three years many cars only need at most an annual service, and you may even have specified a maintenance add-on to your monthly payment to cover servicing and replacements – and annual renewal of the road tax is sometimes included in a lease.

With the rapid rate of progress in new car technology and new model releases, changing cars frequently keeps you at the forefront of new car tech. Leasing makes it easy to keep up to date with a new car on a regular basis.

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