Car Leasing as an investment?

S

Stark

Veteran
Been listening to LBC and there are adverts for people buying cars and leasing them as an investment return, of about 8-11% yield.

I don't get it, and can't see how depreciation wouldn't affect the investment.

I would be curious to see if a bean counter on here could make a strong argument for it

Thoughts?
 
Well lease companies exist to lease cars to third parties and they are in rude health so it must be profitable.

Surely it is quite simple?:-

Costs over life of ownership + desired profit margin / by lease term in months = monthly payment.
 
original guvnor said:
Well lease companies exist to lease cars to third parties and they are in rude health so it must be profitable.

Surely it is quite simple?:-

Costs over life of ownership + desired profit margin / by lease term in months = monthly payment.
Click to expand...

I'd assume they have size in their favour though, and it'd be hard to be competitive on a small scale...

1. They probably negotiate good prices on the vehicles themselves by buying a lot - especially for the offers they run where they probably buy loads of identical spec ones.
2. As part of 1, they probably negotiate hard on the servicing deals.
3. They have enough vehicles out there to cover the occasional one where something goes wrong leading to a loss. Be that something with the car or something else like an insurance claim, awkward customer, etc etc.
 
benlumley said:
original guvnor said:
Well lease companies exist to lease cars to third parties and they are in rude health so it must be profitable.

Surely it is quite simple?:-

Costs over life of ownership + desired profit margin / by lease term in months = monthly payment.
Click to expand...

I'd assume they have size in their favour though, and it'd be hard to be competitive on a small scale...

1. They probably negotiate good prices on the vehicles themselves by buying a lot - especially for the offers they run where they probably buy loads of identical spec ones.
2. As part of 1, they probably negotiate hard on the servicing deals.
3. They have enough vehicles out there to cover the occasional one where something goes wrong leading to a loss. Be that something with the car or something else like an insurance claim, awkward customer, etc etc.
Click to expand...

Absolutely. :thumbsup:
 
There are definitely lease deals around that are better than buying in my opinion.

Wasn't the M3 available for £500-600, you'd easily lose more than that buying. There were cracking ones for less popular audis A6 etc.
 
I asked the question of "how do you make money" to a friend that works in leasing back in 2011. At the time they had just started doing ridiculously cheap C and E class deals and I couldn't figure how they made money. He emailed me the following:

We are getting 28% on C and E Classes. So a £40k car we pay £30k for.

Take the C250cdi I mentioned above, it is £38k less 28% = £27500.
We charge you £1800+(24x£302)= £9050

So £27500 - £9050 = £18500.

Will a £38k C250cdi sport estate be worth more than £18500 after 2 years and 20k miles?


Remember this was back in 2011. I just had a quick search on Autotrader for 2 year old C250cdi sport estates with 20k miles and they seem to be selling for around £21k. Fine if they are selling themselves but if they are selling to trade then they will probably be making nothing. I guess it must work somehow.
 
Two very simple ways. Buy cars in bulk thus obtaining a big discount and the financing where they borrow at a% and then package a+6%.
 
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