How your neighbour is driving a Mercedes!

Have you stopped and looked around recently? Every man and his dog seems to be doing well in life, driving around in shiny new Mercedes, Audi or Volkswagens. You would think the economy was soaring right now but we know it’s not. A lot of people are struggling to make end’s meet. So how can they afford their top of the range cars?

They are actually just making smart choices. They are leasing brand new cars and they’ve done their homework and discovered that the way leasing works means it actually makes sense to lease a premium car.

Everyone wins. To understand why leasing an Audi (for example) is a very have to understand how leasing works.

The most important calculation a leasing company needs to make is the difference between the price they buy the car and the value of the car, once the leasing period has finished. Generally speaking, when you lease a car, the leasing company purchases the car (normally on finance) and then they lease the car to you. Once the leasing period is over, they sell the car and pay off the finance and keep the difference as their profit.

The reason why this is better for you than you getting your own finance is because the leasing company get a large discount from the car manufacturer because they buy so many!

For both you and the leasing company, it’s all about the leasing payment. It’s how they make their profit (and pay the monthly repayments on the finance they took to buy the car) For you it’s your monthly cost.

So, if it’s really about the difference between the buying price and the selling price, then it’s really about the depreciation value. How quickly the car devalues. Premium car brands lose value slower. They are perceived as better build quality so they break down less often and their used car price reflects that.

And this is why a more premium branded car doesn’t actually cost much more than a high street brand. It’s because they hold their value better.

A new Ford Mondeo, the base model, costs $21,000 new.calculator-nerd The estimated average price you could sell the car for in 3 years is currently: $11,000. Over 36 months, the car devalues by £10,000 (48%),

For comparison, A Mercedes S Class, base model, brand new, would cost £29,000 new and is estimated to devalue by 40%, meaning it would be sold for £18,000 having devalued by £11,000.

So a Ford Mondeo loses £10k in value over 3 years and the Mercedes only £11k. That’s a 1k difference, which over 36 months is pretty insignificant

The reality is, you can actually pay pretty much the same for a Ford as you would a Mercedes.

And that’s the thing with Lease cars. It’s a really good option for a lot of people, but there are some truly exceptional deals, especially when you look at the city car category when we have cars starting at £99 a month with no deposit or handler fees. And then there are premium songs

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