Car Finance: “if it appreciates - buy it. If depreciates - rent it”

Filed Under Finance

I’m getting closer to replacing our family car.

I’ve recently written a post about the Ford Mondeo (terrible depreciation) and the Toyota Prius (costly for what it is, despite its green credentials), however I decided to speak to a few car finance companies today to gets some quotes.

There are some good finance deals around at the moment, depending on what car you want, however the wise words of one person I spoke to today have really struck a chord with me.

“If it appreciates - buy it. If it depreciates, rent it.”

Cars depreciate, unless they are sought after by collectors. That depreciation can cost you £5000 per year for a Ford Mondeo and most cars will lose at least 50% of their value over three years. Putting your hard earned savings into such a depreciating asset just doesn’t make sense.

Even with a low APR finance deal, such as Nissan are offering at the moment, you still have to supply a hefty deposit for a personal contract plan with a balloon payment after two or three years. Invariably that deposit will be whittled away by the dreaded depreciation.

So how am I going to finance our next car?

It will almost certainly be by taking out a three year personal car leasing contract. I’ll pay three months deposit and then 35 monthly rentals. At the end of the three years I just hand the car back and sort out another car and finance deal.

I’ll literally save thousands of pounds with a personal contract hire plan.

Here are three car leasing companies that I spoke to today: