With the recession in Mzansi comes the need to achieve more with less money and so when buying a car, leasing is something that needs to be considered.
Traditionally, Mzansi buyers like buying a car using normal finance where they own the vehicle after the finance contracting period i.e. 24, 36, 48, 60 or 72 months. This means they pay installments in line with the type of finance taken. Residual finance does help in lowering the monthly installments however at the end of the contracting period, the balloon payment needs to be settled before you own the vehicle. Lease finance has become popular recently with deals backed by Car Manufacturer Finance package like BMW Select Dynamic Finance, Mercedes Agility Finance etc.
With today’s massively complicated vehicles, owning a vehicle over its warranty period is not as attractive as buying cars from the 90’s. This means warranty coverage is now the clincher when buying a vehicle i.e. Hyundai offering 7 year/20 000km deals making purchase decisions lean towards their products. Lease deals have now become more popular due to the lower installments buyers pay. There are other benefits which buyers need to consider:
OWNERSHIP: Normal finance means the buyer owns the vehicle after the contract period whereas on the lease deal, the buyer never owns the vehicle. The advantage though on lease deals is that every 3 years, you own a new car. Taking into account the 6-year lifecycle of each model (3 year to facelift), a buyer can change a vehicle when the facelift arrives and change that when a new one is launched.
MILEAGE: Probably the most non-attractive part of lease deals is the limited mileage buyers have to adhere to. The general limit is 60 000 km over the 3 year period (20 000 per annum) which lease financiers are quite strict on.
WARRANTY: Due to the mileage limitation and lease period (36 months), this usually means every car on a lease deal is under a manufacturer-backed warranty thus enhancing peace of mind.
Termination: Unlike a normal finance deal where you have to sell the vehicle to exit a finance contract, lease deals come with penalties should you want to exit before the 36 months leasing period.
Future value: A vehicle is a depreciating asset and thus every year, the owner loses in terms of car value. This impacts when trying to sell a car after 3 years or so as the value would be determined by resale valuations. Lease deals don’t have such an issue as at the end of the leasing period (and the owner has adhered to all the lease terms), the owner takes it back to the lease financier and can get another new car.
Taking into account the above, one can easily be discouraged from lease deals based mainly on mileage (Mzansi people love to travel) but then again if you take into account the saving per month, at iMotoonline we suggest considering the following:
- A BMW 118i Auto valued at R450 614 is leased for R6 499pm (11% deposit, 36 months, 11.5% interest). A normal finance deal has an installment of R9000 (11% deposit, 60 months, 11.5% interest) thus giving a saving of R2500.
- If mileage is an issue, consider that banks charge an installment of R2500 on a personal loan of around R90 000 over 44 months. This means a lease buyer can then take the saving of R2500 (BMW 118i Auto example) and buy a used car cash. Checking the net we found a 2014 Opel Corsa Utility Sport with 100 000km valued at R95 000 (before discounts). You can use this car as the “balancer” when you see your lease mileage is going to be exceeded but most importantly after 44 months, you will have no expense to pay on that vehicle meaning the next lease deal will require less stress on your pocket to limit mileage.
Options
For more information in such deals, you can visit BMW by clicking here.