Price, maintenance, electric car…buying a new car or leasing, which costs more?

The figure is quite clear: according to the C-Ways company, the share of leasing in the registration of new cars in 2021 was 47.2% of financing. It was 11% in 2012, 35% in 2018 and 42% in 2020. Suffice it to say. the French have made their choice. Touted by many as the “freedom” option.

Because there’s something to cheating the formula: you own your new car, pay a monthly lease, get free annual maintenance, then return the car at the end of the lease. Before entering into a new tenancy agreement. Here’s what you need to know about this new trend among drivers.

What type of rent?

There are two formulas: lease with option to purchase (LOA) and long term lease (LDD). “In the first half of 2022, 85% of financing in France was in LOA,” notes Cyril Giraud, CFO of Grim regional group. “LLD, which was previously mainly intended for professionals, is gradually evolving for individuals”, we observe at Aramisauto. We add: “The concept of ownership at the end of the contract remains the main criterion that distinguishes these two financial solutions.”

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With an LOA, we retain the ability to purchase the vehicle under the terms of the contract. Otherwise, with LLD we are leasing “lost funds” because there is no option to own the vehicle at the end. Maxime Chipoy, president of MoneyVox, reminds us that “an LOA is considered a consumer loan without an LLD.”

What is the advantage of renting?

The first advantage is related to the improvement of conditions. Guillaume Rostand, president of Liligo.com, recalls: “Rental procedures have been greatly simplified. Before, renting a car was a lot of hassle, it was so complicated.” “There is a de-dramatization of the lease deed, it has become more readable thanks to digitization.” “We have peace of mind about the rent. We know what our budget will be as long as we don’t exceed the predetermined rules,” adds Maxim Chipoy. And then, he adds, “a lot of people don’t want to bother with reselling their car.”

Yoann Demoly, a car sociologist at the University of Versailles-Saint Quentin, points out another advantage: “The interesting thing about renting is that car costs are fixed; households get convenience.” He adds: “They have a real risk aversion to owning a car, and the fact that it provides for car expenses is priceless.” All of these are uncertainties about the vehicle’s environment that drive hiring.

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“With all the changes around fuel regulations between hybrid and electric and tomorrow’s hydrogen, the motorist is wary of going into the purchase knowing that it could all change overnight,” explains Olivier Quesnel, general manager of Fiat and company. Alfa Roméo dealers in Montpellier, Nîmes, Alès, Béziers and Narbonne.

Likewise, with the advent of the electric car. Olivier Quesnel insists that while major manufacturers are increasing the prices of their electric cars due to rising raw materials, leasing has an advantage. “Choosing LOA over an electric car makes it cheaper, more affordable, and you can drive green in addition.” But above all, he “recommends against buying it because technology changes so quickly.”

What are the disadvantages?

“There is a financial disadvantage, – assures Maxim Chipoy. If everything is in order, the contract is respected, especially in terms of mileage, and you return the car in good condition, it is still more expensive, because you do not have resale economy”. He also notes that “two that can get expensive.”

The first: “If you drive more kilometers than the contract, you will have to pay an additional fee of 5-10 cents for each additional kilometer.” Knowing that “there are contracts that allow mileage modulation”. Second: “As with a classic lease, we may have to pay for wear and tear.” Repair costs “can be high,” which is often “one of the reasons for disputes.”

What is the correct lease term?

“A 24-month period in an LOA is ideal,” says Olivier Quesnel. “There’s a huge price difference if you choose a 36-month lease,” he said. Cyril Giraud believes that “36 months is generally a good period”. However, he admits that “customers prefer to go to 24 months so they can change vehicles more often.” Remember that the average lease term is 36 months.

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There are also shorter periods. “Drivers looking to own a vehicle for 12 months are interested in taking out an LLD for the same period, which is generally more cost-effective than opting for a short-term lease of a few days or even a month. , and can be renewed for up to 1 year,” on Assuranceleasing.com says. And then at ByMyCar we add: “Unlike LOA, LLD allows you to lease a vehicle for 24 to 48 or even 60 months.

Can we rent a used car?

It’s not just new cars that are being leased instead of bought. “Long-term leasing is spreading to used cars,” notes Aleth d’Assignies, influence and media director at Roole. Cyril Giraud insists: “Provided that VAT is included, you can opt for a long-term lease with a used car.” It is a vehicle already rented or owned by the manufacturer. This is the difference from a “cash or loan” car. VAT is “deducted” there.