So what’s the first financial thing you look at when researching which new car to test drive? After finding a car or two that you fancy and suit your needs, the list price might be the next element of your search as that’s a guide to your outlay, isn’t it? Of course, you expect a reasonable discount from the dealer but as a ballpark starting point the list price is a pretty good guide, right? Well, maybe, if you are paying with cash or a traditional loan to purchase the car in full.
But when you lease, the list price is almost irrelevant. That’s because leasing rates are based on the difference between the new car price to the leasing company (much lower anyway than typical discounted buy price for the consumer buyer) and the residual value of the vehicle at the end of the lease. So cars that hold their value well make great lease prospects even if the list price is relatively high.
Take for example the Range Rover Evoque. Even in its most basic form it’s an aspirational £30k+ car and out of the reach of many people from a straight purchase point of view and yet it can be leased for less than £300 per month excluding VAT. How many people do you know that pay over £300 per month on a car loan for a used or new car that has nothing like the appeal of the Evoque? Why is it such a low amount? Because demand for used Evoques keeps residuals high and leasing rates low. Just google “used Evoque for sale” and you’ll see how well they hold their price; that is why the new lease rates are so low.
(One thing to note though. List price does come into play, of course, if it’s a business lease and the driver attracts benefit in kind tax as list price is one of the variables affecting how much company car tax an employee pays).
If you’d like to know more about how leasing works and how it could work for you, please get in touch. If you think others would be interested in this post, please share it.
Matt Spivey
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