EVERYONE seems to have an opinion on what causes economic pressures and instability, and looking at the various ideas and theories can certainly be enlightening. However, for many of us, this is secondary to the reality of having to make sure the monthly household budget balances and that we can enjoy the quality of life we expect. With this in mind, we’re going to focus less on the underlying causes and more on how they are changing how we drive.
The rise of car leasing as an attractive option
When you lease a car, you essentially take out a long-term loan from a leasing company, pay monthly throughout the agreement, and then hand the vehicle back at the end. This is in contrast to a traditional car finance deal, where you would pay off the total value of the car throughout the course of your agreement and then own it at the end.
Leasing is becoming more popular in the UK because it provides more flexibility, better value, and a larger range of choice when it comes to driving new models. It’s a model that has already been tried and tested in other countries around the world, so it was only ever a matter of time before it made a real impact in the UK.
Leasing protects drivers from interest rates
Inflation and economic instability impact the baseline rate of interest, which means that all forms of tracking loans fluctuate as a result. The problem with this is that traditional car finance deals, as well as many of your other monthly outgoings, will fluctuate from one month to the next. Clearly, this type of instability will breed uncertainty, making households more likely to have to cut back or less willing to spend and more determined to save. All of this adds up to a less liquid economy, making it harder for businesses to grow, jobs to be created, and tax revenues that fund services to be raised. Leasing fixes the monthly cost and protects drivers from price fluctuations.
A car lease helps protect savings pots
The rising cost of goods and services means that unforeseen issues, such as roof repairs and boiler replacements, are more expensive than they were a few years ago. Households clearly cannot go without such goods and services, and yet there is more pressure on savings than there has been for at least a generation. A car lease will generally have a smaller upfront cost than traditional finance, allowing the savings pot to be largely untouched. Drivers are increasingly looking for ways to both reduce costs and minimise upfront costs, which is one of the main reasons for the rapid increase in the number of leasing agreements in the UK.
Economic uncertainty is making overheads leaner
In a perfect world, we would always have the right amount of money to fund a repair, a service, or some scheduled maintenance, but the economy is making this increasingly difficult. More and more UK drivers are waking up to the idea that companies like Vantage Leasing can help reduce overheads by connecting them with low-mileage vehicles and the very latest models. It is no longer a matter of choosing between an expensive new car and a cheap third-hand car with 100,000 miles on the clock. The former hits savings while the latter quickly becomes a larger overhead than expected due to constant repairs and servicing. A brand-new leased car where you only pay for the depreciation reduces the size of the upfront payment while simultaneously making running costs, and therefore ongoing overheads, much more predictable.
There is an increasing focus on owning assets with true value
Generally speaking, the value of property and land will trend upwards over time, provided you look over a long enough period of time. Investment funds are designed to do the same, and will generally produce a return if the economy as a whole grows and the investment is left to compound for long enough. Cars and vehicles, by contrast, lose around half their value in as little as two years, and that’s irrespective of how much you drive them and how hard you work to maintain them.
The current instability and economic uncertainty mean that more UK earners are thinking about where to put their money for the future. Leasing allows them to get on the road without being left with a largely worthless asset, but also provides more options and flexibility when it comes to investing the resulting savings in more reliable assets, such as property and bonds.
We hope that by highlighting the practical ways in which economic pressures are driving consumer behaviour, we have provided an enlightening way of looking at what is really going on.
Article written by Katie Howe
