Leasing used cars.

[willitbe]

Hi All.

I am in the process of setting up a website to promote our used car leasing.

It is aimed predominantly at self employed people who, amongst many other things, travel a lot of miles to earn their crust, such as salesmen.

We don't have mileage limitations to speak of and we don't need a 3 year contract.

We have pretty much got everything ready to go. So was just asking for people's thoughts on it and would they ever lease a used car.

Please be as forthright as you please, I have a super thick skin, so won't be offended, just asking in case we have missed something glaringly obvious.

Many thanks Will.

P.s We have a 54 plate 320d coming back next week should anyone be keen , please pm me with a contact number.

Cheers Will

 

Depends on prices and quality of stock plus you need finance and maintenance in place.

seems to be a demand for short term lease.

Earl

 

[KDMINX]

Sounds like a fantastic business model to me!

At the moment the choice for someone who can't afford to buy a new outright are:
- Lease a new car
- Spend 10-15k on a used car

I'm sure there are loads of people who get a car allowance from their employer who'd much rather lease a 1yo BMW/Audi/Merc rather than a new Mondeo/Insignia!

Particularly if it could be done on a rolling 30 day contract (or a 6 month contract that rolled into 30 days).

Sounds like a model that would need a great deal of capital though and a very in-depth knowledge of car pricing / depreciation.

Market test: I'd be interested!

 

[willitbe]

Thanks for your replies so far!.

The funding part of it is in place, luckily a member of the team has been involved in cars and car dealerships since the year dot, he is still a director of a Mitsubishi and a Mazda dealership now.

The rolling contract is the way we are going to go, I think it helps with the tax aspect of the car(please don't quote me on that, I only skimmed over that bit;-).).

We have approached a couple of companies and they are keen because of the short term aspect, it stops the worry of employing someone, getting them a car for 3 years and then they turn out to be rubbish.

Salesmen like it because they aren't limited on the miles and having a motor they can hand back when work dries up, suits them fine!

 

[willitbe]

Sounds like a fantastic business model to me!

At the moment the choice for someone who can't afford to buy a new outright are:
- Lease a new car
- Spend 10-15k on a used car

I’m sure there are loads of people who get a car allowance from their employer who’d much rather lease a 1yo BMW/Audi/Merc rather than a new Mondeo/Insignia!

Particularly if it could be done on a rolling 30 day contract (or a 6 month contract that rolled into 30 days).

Sounds like a model that would need a great deal of capital though and a very in-depth knowledge of car pricing / depreciation.

Market test: I’d be interested!

Hi KD and thanks for your reply.

With regards depreciation, we are using stock that has mostly had it's hit on depreciation. There wouldn't be a great deal of point leasing a 1 year old car out to someone, only for them to hand it back 3 months down the line.

It could be done but at a price and then the benefits of leasing used aren't so great compared to new.

We have just moved a 56 Passat Tdi on to a client with 48k miles, still looks new but not a lot left to lose in depreciation.

The client got a really nice, clean car on terms that favoured his employment.

Cheers Will

 

[Willself]

Excellent!! While its not a new idea!Because it's financed!many fall
at that hurdle!! unless you are taking on all comers....When i did it a number of years ago..Fiat Punto's were £99.00. per month on a 12 month contract...often used that as a sweetener...ie..order new merc..and we will include a 2nd car for your good lady wife!!LOL

 

[TotallySport]

Hi KD and thanks for your reply.

With regards depreciation, we are using stock that has mostly had it's hit on depreciation. There wouldn't be a great deal of point leasing a 1 year old car out to someone, only for them to hand it back 3 months down the line.

It could be done but at a price and then the benefits of leasing used aren't so great compared to new.

We have just moved a 56 Passat Tdi on to a client with 48k miles, still looks new but not a lot left to lose in depreciation.

The client got a really nice, clean car on terms that favoured his employment.

Cheers Will

So how much would that cost?

 

[willitbe]

Excellent!! While its not a new idea!Because it's financed!many fall
at that hurdle!! unless you are taking on all comers....When i did it a number of years ago..Fiat Punto's were £99.00. per month on a 12 month contract...often used that as a sweetener...ie..order new merc..and we will include a 2nd car for your good lady wife!!LOL

Hi Will.

We have a simple but favourable barrier to entry and in most instances, it means pretty much anyone can get a vehicle, whether it be a car or a van.

We will stick with used because new car brokers are on every corner and that market is well and truly dealt with.

And let's be honest, how many people aren't bored to death with a car after 12 months?

Cheers Will

 

[willitbe]

So how much would that cost?

He has had that on a 30 day rolling contract, a very short term deal that costs him 500 a month. If he had had it over 12 months, it would have been a fair bit less. His employer gives 600 a month allowance, so he makes a few quid too!

Another example is a 56 plate RX-8, 53K miles, met. blue, grey leather, really nice motor, a 15 month contract @ 400 a month.

The bloke was over the moon with that!
Cheers Will

 

[TotallySport]

Wow, I thought they would be cheaper, I can get a new passat on lease for that and have change, I understand the rolling contract etc but I could get a 2 year loan and buy a 56 plate second hand over 2 years and then resell the car after.

Good Luck

 

[willitbe]

Wow, I thought they would be cheaper, I can get a new passat on lease for that and have change, I understand the rolling contract etc but I could get a 2 year loan and buy a 56 plate second hand over 2 years and then resell the car after.

Good Luck

Totally sport.

I think you are probably missing the point a little bit.But I understand fully what you are saying.

Firstly, yes you can get a new on lease and have change.

Yes you could go and get a loan and buy one and then sell it.

This client has a 6 month contract with his employer, he does a lot of miles, way over and above what a new lease will allow without paying extra.
His employer gives him a 600 a month vehicle allowance.
He isn't in a position to get a loan from his bank (like many people!).

If he decides the job isn't for him, or his employer decides that he isn't the one for them, he hands it back to us.

He doesn't have a lease he has to fund regardless of his income, he doesn't have a bank loan to repay, or a car to sell to repay it.

It suits him and the car and the worry of breaking down isn't his problem.

A bank loan doesn't rid that from the equation, and lets face it, a 56 plate car has a very good chance of something going wrong doesn't it?

Now I hope that sort of explains the benefits of leasing used as opposed to buying or leasing new, not everyone is in the position to pass all the checks banks and lease companies use, so used is the only option open to them, should they need a motor.

Cheers Will

 

[TotallySport]

Totally sport.

I think you are probably missing the point a little bit.But I understand fully what you are saying.

Firstly, yes you can get a new on lease and have change.

Yes you could go and get a loan and buy one and then sell it.

This client has a 6 month contract with his employer, he does a lot of miles, way over and above what a new lease will allow without paying extra.
His employer gives him a 600 a month vehicle allowance.
He isn't in a position to get a loan from his bank (like many people!).

If he decides the job isn't for him, or his employer decides that he isn't the one for them, he hands it back to us.

He doesn't have a lease he has to fund regardless of his income, he doesn't have a bank loan to repay, or a car to sell to repay it.

It suits him and the car and the worry of breaking down isn't his problem.

A bank loan doesn't rid that from the equation, and lets face it, a 56 plate car has a very good chance of something going wrong doesn't it?

Now I hope that sort of explains the benefits of leasing used as opposed to buying or leasing new, not everyone is in the position to pass all the checks banks and lease companies use, so used is the only option open to them, should they need a motor.

Cheers Will

I can see the benefits of the short term contract and I am not in this sort of role and never have been so I am probibly not a good candiate to comment on.

But IMO if the person has a 6 months contract I would assume we would have worked lined up after the 6 month contract had finished, in which case he would still be better getting a new lease contract, if the company expected another role to be available after the 6 months or may extend the contract then agian it would be benefit from the new lease as well.

The 56 plate and machanical problems which even your expecting and the higher price would put me off.But agian I am not in the same position as i am not the people your targeting, and you may have found a good niche which I don't understand in which case I wish you all the best.

 

[willitbe]

I can see the benefits of the short term contract and I am not in this sort of role and never have been so I am probibly not a good candiate to comment on.

But IMO if the person has a 6 months contract I would assume we would have worked lined up after the 6 month contract had finished, in which case he would still be better getting a new lease contract, if the company expected another role to be available after the 6 months or may extend the contract then agian it would be benefit from the new lease as well.

The 56 plate and machanical problems which even your expecting and the higher price would put me off.But agian I am not in the same position as i am not the people your targeting, and you may have found a good niche which I don't understand in which case I wish you all the best.

Hello again.

This particular client is a salesman in a very "hard-sell" market, which historically, has a very high turnover of staff should targets not be met.

That aside, he wasn't in a position to get a new lease, as I have already stated, he wouldn't have passed their criteria.

I am not expecting anything to go wrong mechanically with car, but unfortunately things do on 3/4 year old cars.

I would imagine 60 percent of the population at present perhaps wouldn't get passed on a new lease credit check, that needs no understanding, that is life, people haven't got flawless financial history!.

Cheers Will

 

Drop me a line; we might be a route to market for you

M

 

[KDMINX]

Seems a bit expensive to me as well!

Back of a fag packet job:

Say I lease a 3yo car for 12 months:
- Initial cost of car: £10k
- FV: £8k
- Depreachiation: £2k
- Cost of capital (5%PA): £500
- Cost price: £208 PCM

The rest is admin + margin. Maths asside I wouldn't pay £400 PCM for a 3yo car when I could get a new one for that!

 

Seems a bit expensive to me as well!

Back of a fag packet job:

Say I lease a 3yo car for 12 months:
- Initial cost of car: £10k
- FV: £8k
- Depreachiation: £2k
- Cost of capital (5%PA): £500
- Cost price: £208 PCM

The rest is admin + margin. Maths asside I wouldn't pay £400 PCM for a 3yo car when I could get a new one for that!

depreciation £2k I wish you can double that.

Earl

 

[JEREMY HAWKE]

I agree it is a bit steep but there is a market for it.

It is very difficult to get a lease where you are not tied down without mileage restrictions .

I recon they should do OK

 

[craiga1971]

Hi Will

What about this?

You have a car - for argument sake - a 2005 Ford Mondeo. Dealer sale price is 4K (trade value 3k). In 12 months time it will be worth 3k (dealer) and 2k trade.

so, the minimum that the client has to pay is 1k (if you want to use Dealer > Dealer) or 2k (if you want to use Dealer > Trade). So the 1k or 2k has to be funded on a monthly basis.

Add on a % for admin and costs.

It looks like you are targetting people with bad credit records and nearly everything I read about such companies is NOT GOOD.

I think it is a crazy business model to expect people to pay near to new leas desls for used cars.

HTH.

 

[willitbe]

Seems a bit expensive to me as well!

Back of a fag packet job:

Say I lease a 3yo car for 12 months:
- Initial cost of car: £10k
- FV: £8k
- Depreachiation: £2k
- Cost of capital (5%PA): £500
- Cost price: £208 PCM

The rest is admin + margin. Maths asside I wouldn't pay £400 PCM for a 3yo car when I could get a new one for that!

Hello KDMINX.

Well if you can obtain loans and pass finance agreements and don't do any miles, then why would you need to?

We aren't aiming at you, we are aiming at high mileage/not so good credit-rating/short term needs clients.

Cheers Will

 

[KDMINX]

depreciation £2k I wish you can double that.

I alway like a challenge! Well let's move on from the fag packet:

VW Passat Saloon 2.0 TDI CR 110 Highline

Year 0 £20,595
Year 1 £11,155
Year 2 £9,489
Year 3 £8,490 Begining of lease
Year 4 £6,770 End of lease

Source whatcar.com

- Initial cost of car: £8490
- FV: £6770
- Depreachiation: £1720
- Cost of capital (5%PA): £424.50
- Cost price: £141 PCM

That doesn't take into account the interest saved because the customer starts making payments after the first month. Also using the industry standard 3+11 monthly payments would be even cheaper!

Now don't get me wrong, I don't think that anyone should be afraid or embarrassed to make margin. I am concerned that you are positioning your product at the Value end of the market and pricing it at (or close to) the premium (ie new car) end.

I don't mean any of this as a dig, I genuinely believe there is a large untapped market for your product, just not at the prices you are charging.

 

[willitbe]

Hi Will

What about this?

You have a car - for argument sake - a 2005 Ford Mondeo. Dealer sale price is 4K (trade value 3k). In 12 months time it will be worth 3k (dealer) and 2k trade.

so, the minimum that the client has to pay is 1k (if you want to use Dealer > Dealer) or 2k (if you want to use Dealer > Trade). So the 1k or 2k has to be funded on a monthly basis.

Add on a % for admin and costs.

It looks like you are targetting people with bad credit records and nearly everything I read about such companies is NOT GOOD.

I think it is a crazy business model to expect people to pay near to new leas desls for used cars.

HTH.

Hi Craig.

Many thanks for your input. No we are not just basing it on Bad credit, that is just one of the selling points.

Craig, if someone came to us and asked for a 3 year old car and wanted a 3 year deal on it, then it wouldn't be anywhere near the cost of comparable vehicle on a new lease.

I think the point is being missed, it is short term leasing without restrictions and is made available to 98% of applicants.

I don't have example prices in front of me but I would love to know the cost of a new motor on a 3 year deal that allowed for 100k miles a year.

Anyone have such a beast?

Cheers Will

 

I alway like a challenge! Well let's move on from the fag packet:

VW Passat Saloon 2.0 TDI CR 110 Highline

Year 0 £20,595
Year 1 £11,155
Year 2 £9,489
Year 3 £8,490 Begining of lease
Year 4 £6,770 End of lease

Source whatcar.com

- Initial cost of car: £8490
- FV: £6770
- Depreachiation: £1720
- Cost of capital (5%PA): £424.50
- Cost price: £141 PCM

That doesn't take into account the interest saved because the customer starts making payments after the first month. Also using the industry standard 3+11 monthly payments would be even cheaper!

Now don't get me wrong, I don't think that anyone should be afraid or embarrassed to make margin. I am concerned that you are positioning your product at the Value end of the market and pricing it at (or close to) the premium (ie new car) end.

I don’t mean any of this as a dig, I genuinely believe there is a large untapped market for your product, just not at the prices you are charging.

picking one of the least depreciating cars on the road and using a retail mag is a smart move.

Earl

 

[KDMINX]

Hello KDMINX.We aren't aiming at you, we are aiming at high mileage/not so good credit-rating/short term needs clients.
Cheers Will

Hi Will, I used to work in a job doing 1500 miles a week, every week (sometimes more). Although I didn't get involved in fleet, company policy was Jap Saloon cars and replace them after 18 months. Although we all hated the cars they were reliable.

When you do that many miles you spend enough time at the garage getting new tyres, brakes, routine servicing etc. Without the risk of them breaking down.
A missed meeting can cost a salesman a lot of money and the company he works for even more!

Although I might consider your offer now I own the company and don't do so many miles I would never have dreamed of taking a risk on a used car when it was essential to how I made my money!

 

[willitbe]

I alway like a challenge! Well let's move on from the fag packet:

VW Passat Saloon 2.0 TDI CR 110 Highline

Year 0 £20,595
Year 1 £11,155
Year 2 £9,489
Year 3 £8,490 Begining of lease
Year 4 £6,770 End of lease

Source whatcar.com

- Initial cost of car: £8490
- FV: £6770
- Depreachiation: £1720
- Cost of capital (5%PA): £424.50
- Cost price: £141 PCM

That doesn't take into account the interest saved because the customer starts making payments after the first month. Also using the industry standard 3+11 monthly payments would be even cheaper!

Now don't get me wrong, I don't think that anyone should be afraid or embarrassed to make margin. I am concerned that you are positioning your product at the Value end of the market and pricing it at (or close to) the premium (ie new car) end.

I don’t mean any of this as a dig, I genuinely believe there is a large untapped market for your product, just not at the prices you are charging.

I think SirEarl maybe thought you were basing it on a new vehicle.

Not forgetting we have to include any repair costs, tyres etc etc.

I think if people are looking at the bigger picture here.

The client who has the Passat could quite conceivably put 100k on that car in 6 months, such are the demands of his job, we then have a vehicle that is worth 1500k plus less than a similar model without the miles.

That loss has to be covered, it can't just be dismissed as wear and tear.

Cheers Will..

 

[willitbe]

Hi Will, I used to work in a job doing 1500 miles a week, every week (sometimes more). Although I didn't get involved in fleet, company policy was Jap Saloon cars and replace them after 18 months. Although we all hated the cars they were reliable.

When you do that many miles you spend enough time at the garage getting new tyres, brakes, routine servicing etc. Without the risk of them breaking down.
A missed meeting can cost a salesman a lot of money and the company he works for even more!

Although I might consider your offer now I own the company and don’t do so many miles I would never have dreamed of taking a risk on a used car when it was essential to how I made my money!

Hi KD.

To be perfectly honest, I don't expect a 48k mileage Passat with FSH to be any less reliable than a new one, it is just a possibility, as with any car, new or used, that it may breakdown.

If people weren't taking cars from us, then I would suspect you may be right but as they are, then the market is there and at those prices.

That isn't meant to be rude by the way, just that those clients we have already have deemed the deals to be acceptable for their circumstances.

And as we all know, everyone's circumstances and needs are different.

Cheers Will

 

[KDMINX]

Will, I am not in your business and I would never claim to know more about it than you do.

I just wanted to give you my perspective as a potential customer, and some insight into my thought process and buying criteria.

Re. Reliability, I'm not an expert on that either, it was just the reason we were given as to why we had 18 month leases on Jap saloons when we would have prefered 3 year leases on German cars (which we assumed cost the same).

 

[DancingWithPoodles]

My Mercedes is £600 on lease I believe per month. I just dont get the lease thing... I belive just stupids go for a lease, where is the point to pay for someone elses car finance
Either buy it on finance or get a cheaper one if you cannot afford it... don't be stupid and buy it on lease for £500 a month...

 

[willitbe]

My Mercedes is £600 on lease I believe per month. I just dont get the lease thing... I belive just stupids go for a lease, where is the point to pay for someone elses car finance
Either buy it on finance or get a cheaper one if you cannot afford it... don't be stupid and buy it on lease for £500 a month...

After reading this a gizzillion times, I think you are saying you are stupid, is that correct?

Cheers Will

 

[TotallySport]

After reading this a gizzillion times, I think you are saying you are stupid, is that correct?

Cheers Will

Yes!!I got the same result

 

My Mercedes is £600 on lease I believe per month. I just dont get the lease thing... I belive just stupids go for a lease, where is the point to pay for someone elses car finance
Either buy it on finance or get a cheaper one if you cannot afford it... don't be stupid and buy it on lease for £500 a month...

well leasing can be considerably cheaper on some cars and some circumstances for someone wanting a new car mainly because of the massive depreciation involved.

up to 50% on some vehicles in 1 year.

If your going to buy new and keep the car for 10 years buy.

If you change cars every year or two lease.


Earl

 

[gillyfleur]

I was doing something similar with cars - but with a rental company where I long term rented for 6 months (apparently that is long term in the rental industry) My mileage was around the 35K p.a level and I was paying £425 per month for a brand new VW EOS (approx £25K to buy ?) - and previous to that had a brand new VW Passat for about £380. I could return the car at any point at no extra cost - just like off hiring a car at the airport. I only had to pay for the service if it went over the mileage interval - and if I had it done by the rental company it was at cost. I had very little additional outgoings and it well fitted into my monthly car allowance. Could your target market not be doing this cheaper than they pay you ? Presumably you could negotiate a 6 month rental deal with any car hire company ? or is it just that your customers haven't thought of this as an option ? Only a thought..............

 

[adventurelife]

I have looked at this several times as I do not really care if a car is new or not as long as it does the job and is reliable. However, everyone I found who were leasing used cars were charging similar money to leasing new:|

If you can get your business model to work for you and undercut the new leasing market by a fair whack and it needs to be a fair whack as no one is going to take a used car over a new one for £20-30 per month you should clean up.

I have always been surprised no one does this in a big way, maybe the numbers do not work?

 

I have looked at this several times as I do not really care if a car is new or not as long as it does the job and is reliable. However, everyone I found who were leasing used cars were charging similar money to leasing new:|

?

were these short term leases which get horrendously expensive on new vehicles.?

Earl

 

[adventurelife]

were these short term leases which get horrendously expensive on new vehicles.?

Earl

No I always lease for at least 2 years. If I could get a 1-3 year old vehicle on lease at a good reduction on a new vehicle lease I would always go for it.

 

[willitbe]

Many thanks for all contributions to this thread, it is highly appreciated.

It is always good to hear about others experiences and perceptions about leasing vehicles.

Adventurelife: I believe the reason behind why not many firms lease used cars to be that they have to be funded/purchased, as opposed to new, where many are just brokering on behalf of the Manufacturer/Dealership.

Within 3 years, I suspect many are leases that have been bought from people that have had to bail out. After 3 years, the chances are the car is then owned by someone.

GillyFleur: A very good point made. Whilst doing my research, I contacted a couple of local but big name rental firms, I couldn't seem to get a Ford Focus for less than £167 a week, regardless of the time I wanted to hire it for.

I am fully aware that if I had tried everyone on Google, I may have had some joy but the information I had got pretty much gave me an idea of costs involved.

Once again, Thanks to all. It seems that whilst some people can't imagine why anybody would want to lease used, others can and it's the others that can that we are aiming at.

Please free to continue adding any thoughts, all contributions are digested and thought about, as it all aids ongoing research and pricing.

Cheers Will

 

[cinddy]

Interested idea sounds like you need to work hard to promote your idea on the internet. But that's for shore its great awesome idea of working with cars at the time.. Get some experience and work on it soon you will get results.. Good Luck

 

[TotallySport]

Once again, Thanks to all. It seems that whilst some people can't imagine why anybody would want to lease used, others can and it's the others that can that we are aiming at.

I think your missing my point and I hope I am right in saying adventurelifes, as we are both looking at leasing and don't care how old the car is but renting an older car for more than renting a new car is mad.

I know your comments above your state your target market seems to be high risk, high milage and if thats the case then your missing our business and if we are not in your business plan for a customer base thats fine, but if you can work your prices to fit in low risk, low milage, lower prices then you will get both sides of the market.

You could even setup two business to offer the different solutions or two web sites to market for the different business and keywords, but don't assume that I am not interested in an older car on lease, I am just not interested in an old car at a higher price than a new one.

IMO it has to be make financial sense to lease my car from you and as I have explained previously it doesn't, although I accept for others it might.

 

[willitbe]

Morning Totally Sport.

I am going to refrain from continuing to repeat myself, or at least try.;-).

I fully understand what you are saying and I fully agree with your point but the examples I gave were not the "Norm" in terms of personal requirements and circumstances.

If for example you asked us for a Mercedes 220 cdi and you were prepared to have it for 2 years, you wouldn't be nearly paying as much as a new Mercedes lease.

The longer the commitment, the better the price naturally.

We dont expect you to service the car at Mercedes at your cost and we don't penalise you for handing the car back should the need arise.

But I do agree with maybe having a 2-tier system and that is something I will look into.

Many thanks Will

 

[Lee Jones Jnr]

I think there is a market for what you are offering.
The people questioning the price don't seem to be taking into account the usual 2-3 year commitment and the 10'000 mile per year limit.
For me it doesn't make sense to lease because you can buy the car cheaper than leasing and I like to change as and when I feel like it.

 

I think there may well be a good market for upmarket vehicles in the 2 to 3 year old range.

But maybe only if the prices are at least 30% below new car lease.

I suspect leasing 3 year old Corsa's may be more trouble than its worth.?

Earl