Business, Personal

The Maths of Vehicle Leasing - an overview of Depreciation

Posted on May 19, 2017

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Our industry can be a funny one at times. We know that lots and lots of companies use Concept Vehicle Leasing for their fleet and contract hire needs. Personally I know of, and can see the benefits in, Vehicle Leasing and obviously try to make others aware of this and try to share it with those who ask about it, but one thing that confuses me is why some people do not consider leasing at all for either their personal or Business Lease.

What I would like to know is what is the first thing you think of when considering vehicle leasing as an option and if you have never used this method for your business, why not? (This includes company cars, contract hire, vehicle rental and so on).

The benefits are huge in the favour of vehicle leasing over purchasing and this equation best explains the mathematical side of leasing vs buying:

If you imagine a vehicle costing £40,000 new for example, the depreciation (amount of value it loses) would be around 25% per year, or in financial terms - £10,000 PER YEAR. Over 2 years that works out as £20,000 (or in other words your vehicle is now worth £20,000 2 years later and this can be substantiated on places like Autotrader.

If you lease the same vehicle you would spend around £334 per month (or £8016 over two years). The value of the used car is £20,000 meaning your spend on the £40,000 purchase overall is £20,000. If you lease the same vehicle it costs £8016 over 2 years, this saves you £20,000- £8016 = £11984.

This is the amount you could save by leasing over purchasing new. If you were to buy a 2 year old vehicle like you have suggested, you would spend £20,000 now. This means in two years it would go down to around a selling value of £10,000. According to the maths you would still save money leasing over purchasing but you would be in a BRAND NEW vehicle rather than a 2 year old vehicle, and remember you could still save around £2000 over the two years as well.

So what are you waiting for? Contact us today for your next vehicle, whether it's your 1st lease or you 10th, contact us today! Call 0800 043 2050 or visit our vehicle leasing website.