Buying vs. leasing a car in Germany

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I was out shopping the other week and saw a very nice Alfa Romeo, which was being offered for lease at 179€ a month for 2 years and I thought that looked pretty cheap. Jimbo then mentioned that Sixt were offering the Mini Cooper for 100€ per month, again for a minimum 2 years.

 

According to the site(Bearing in mind I cant really read German very well!)it is 59€ per month.

 

Now I am never going to spend a lot for a car, or for that matter never going to own a BMW or Mercedes in my life, I am just not paid enough :( So leasing seems to make sense? After 2 years, you just lease a different car?

 

Can anyone tell me what the hidden costs are here, I know there is a limited mileage(30K), but what else would there be?

 

http://www.e-sixt.de/main?/neuwagen/autole...autoleasing.php

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Leasing is a good idea, as long as you don't mind not owning the car. But does mean you can change for a new one quite easily.

 

Problems : watch the limit, usually the charges for miles over the limit are quite high.

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Leasing is just another form of finance, but is very popular in Germany especially for companies, or self-employed people, as it is VERY tax efficient.

 

The leasing company (which does not need to be related to the car dealer who sells the car, or the manufacturer, but often is) simply pays for and retains ownership of the car, but permits you to use/drive it. You lease for a period of time (3 years is usually the most cost-efficient) and simply pay the sum of the loss of value in the car, plus the interest on money loaned over the period of lease.

 

There are usually two types of leasing calculation - "residual value" ("Restwert") or Kilometre leasing. With the former you agree on a final value of the vehicle after the leasing period, with the latter you simply agree to a certain number of kilometres per year. When you return the car irrespective of the leasing deal you take they WILL re-value it and may determine that because you've knocked it about a bit, the value is actually less than was planned, and you may be liable for additional body repair or refurbishment costs. With kilometre-leasing, if you under-estimate your usage, or drive over the agreed limit you usually get a kilometre-based refund (or have to pay for the excessive use). The car will still be subject to a "fair wear and tear" evaluation.

 

One major advantage of leasing higher-end cars (e.g. BMW, Mercedes, Porsche) is that they lose less in value over the leasing period, so the leasing rate may be much less than say a Ford or Opel.

 

Leasing details are subject to VERY strict contracts, e.g.

  • the vehicle MUST be serviced according to manufacturers specifications, by manufacturer approved dealers.
  • If, for any reason you want to cancel the contract before the end of the agreed leasing period you may be required to pay ALL outstanding monthly payments.
  • You will almost certainly be required to a minimum level of (comprehensive, "Vollkasko") insurance with mininimum excess (deductible, "selbstbeteiligung")

This can add cost compared to other forms of finance.

 

Note that you don't need to accept a leasing offer from the dealer selling the car. There are many other private leasing agencies, including private banks. In these cases it is usual to negotiate a better cash price for the vehicle, then arrange the lease-finance elsewhere.

 

Most leasing deals require a non-refundable downpayment (which effectively reduces the amount you are borrowing). 20% of the car value is not unusual. When looking at attaractive adverts checkout the smallprint for the downpayment and how many kilometres per year are allowed.

 

Most leasing companies will perform stringent checks on your financial status before agreeing to a deal, especially if you are making a lower downpayment, so make sure you are in good shape with both your bank and SCHUFA (the German credit data agency) before you apply.

 

If buying a new car watch out for additional startup costs above and beyond the downpayment. Delivery and preparation costs ("Überführungskosten") are payable on all new cars and can be as much as €800-1000, along with registration costs ("Zulassung") (around €60) and maybe a required extended guarantee (€500-800) are not unusual requirements, and are not normally included in any leasing calculation unless you request them.

 

When you do return a lease-car they will go over it with a fine-tooth-comb for any damage, marks, scratches which can reduce final-value. BMW especially have a reputation for being very stringent on this. If you are buying your next car from the same dealer this may be overlooked, but if changing dealer or make, expect extended discussions over final value...

 

Currently there are some good leasing deals to be had.. interest rates are low and manufacturers have cars on their hands to dispose of. Many dealers make leasing very attractive to lock the customer in...

 

Minefield though it may seem, I've always leased all my cars, both business and private. It does seem an easier way to drive a better class of car than you think you can afford.. :). It's also an easy way to avoid major problems when you want to get rid - the dealer simply takes the now-used car off your hands...

 

YL6

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If you work for a company, check with your benefits person. Most of the big German companies offer car perks ...even if it's not in your employment package you may be able to jump onto the company's leasing pool or rates.

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Unless you use a company supplied or sponsored car almost exclusively for business then there is quite a tax liability to swallow - 1% of the new purchase price of the car (including extras) per month. On y €20,000 car that's €200 a month...

 

Many companies have negotiated preferrable rates with local dealers to get good deals on new (and used) vehicles for their employees. if you take advantage of this discount, but pay for the car yourself, then you won't normally incur any additional tax issues...

 

YL6

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Wow, those look like really good deals but are there any BIG up-front costs e.g. down-payment that aren't obvious to those who read crap German?

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Thanks YL6, the main points you mentioned I pretty much expected.

 

Just reading the Mini again, from what I can see its a 5,000€ up front deposit.

 

The limited mileage wouldnt really bother me as when I had a car back in the UK, I only averaged about 3K miles per year, thought granted I would probably drive a bit more over here.

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Are you sure you need a car?

 

I have one but Im getting rid of it.

 

Getting round munich will be by bike, public transport or taxi.

 

Going away will be by renting a car.

 

Eg I just rented a Beetle cabriolet to head down to Italy for the weekend. When I turned up to pick up the car they upgraded me to a brand new Mercedes SLK (and allowed me to take it to Italy). Because I get car rental insurance included with my credit card total cost from Fri- Tues am EUR209. This was with Sixt

 

A "normal" car is just EUR50 or so a weekend.

 

I figure that the money I would normally spend on a car (EUR300-400 a month inc the depreciation, insurance and hassle) is more than a monthly Isarcard, ad hoc car rental and the cost of the credit card. Plus I get to drive a convertible to Italy, an estate car to Ikea, and a 4x4 to go Skiing if I want. And I get fitter and do a bit for the global environment.

 

Just a thought.

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...or of course you could buy second hand. Prices here are low - for the 5k deposit you could pick up a reasonable second hand motor, and if you're not doing many miles it might not be such a bad bet...

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True, the thought of leasing was appealing until I saw the deposit required. If I had 5K€ spare, I probably would be looking at buying and not leasing.

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@ speakfreak

 

What credit card did you get that includes insurance? We currently don't have a European credit card, but might be interested in getting one for that reason alone.

 

Thanks!

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Going away will be by renting a car.

Hey, that reminds me. Does anyone know of a car rental company that lets you rent a car in one country and take it back to the office in another?

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@ theJarvi

 

Focus Money (the awful right wing buisness magazine) used to have a selction pop up thingy that let you choose the best credit cards available in germany depending what youwanted.

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It is the Platinum Amex?

 

It comes with numerous benefits inc the Car rental insurance thing. eg Entry in airport lounges regardless of your ticket, ww travel insurance, best price guarantee for all stuff bought with it etc.

 

FYI I got it from one of the Amex guys who canvas at Munich airport. Of interest to you will be:

 

- I had had my german bank account for about a week when I applied for the card

- They have no way of verifying what I said I earnt was true. ;) (I am not payed in this country- nor in that bank account).

- I got given the card before my bank would even give me an EC Card.

- I think the minimum income limit is fairly low for Germany anyway as they try to ramp up ownership over here. (Guess- EUR30K or less?)

- It costs me EUR400 a year although Im told that may be negotiable

- I have made a claim on the car insurance and it all worked as described

- Its actually a charge card- you have to pay your bill off in full every month

- In theory you have no spending limit

 

...and no I dont work for them.

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a car rental company that lets you rent a car in one country and take it back to the office in another

I've not checked but I once rented a Sixt car in the south of France and it had a German registration plate.

 

...and no I dont work for them either! :)

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Does anyone know of a car rental company that lets you rent a car in one country and take it back to the office in another

Most of the larger companies (Sixt, Avis, Herz, etc) allow this, but have horrendous charges for doing it. At the end of the day you're paying them a premium for them to return the car themselves to the originating country...

 

YL6

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Most car rental companies let you rent in one company and return in another for a fee. But there are restrictions on which cars and countries you can do this with. And you cant rent in the uk and return on the continent and vice cersa.

Nor can you rent in say germany and return in eastern europe (if they will let you drive there in the first place!)

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you cant rent in the uk and return on the continent and vice cersa

Avis have an (expensive!) deal which lets you rent in UK, hand in your car at a channel port. and have another waiting for you on the other side...

 

YL6

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There's also the option for one of those car clubs. I think one that I know of is something like 60 euro per year, and then 8 euro per day (or a fraction by the hour) for when you take a car. All inclusive, cleaning, insurance, etc. Pretty nice deal if you ask me.

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@3Lions

 

Just to be clear, the word "deposit" in American English implies you'll be getting it back at the end of the lease. On the website, they're talking about an "Anzahlung" or down payment which you definitely won't get back at the end of the lease. This was probably was already clear to you but it's worth mentioning anyway.

 

Be honest with yourself about how much you'd actually use the car. Chances are you'd be better off renting/hiring on the several occasions that you actually need the car. Otherwise, follow Jimbo's advice and buy a used car. If you buy one that's already say 5 years old then it won't lose so much value in two years. Of course then you have to factor in other things like insurance, taxes and possible repairs.

 

In fact, you'd probably end up dropping the same amount of money on a lease as you would have by actually buying the same car new and then selling it two years later. At the end of the day, these companies do want to make a profit! Of course this all assumes that your company won't be contributing any money to the cause.

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