Does leasing a car make sense?

Ever popular in Europe, South African’s can now enjoy a simplified service called “Ariva” where they can lease a car for a fixed fee for a fixed time period. South African’s are used to buying a car, paying a monthly fee and hopefully not having a balloon payment at the end of the term. However, does it make sense to be left with a five year old vehicle and how much does it cost you in servicing and insurance? With Ariva you pay your monthly fee’s and then hand back your car after five years to begin again. Let’s run some numbers:

The Kia Picanto costs R2861 per month on Ariva meaning R154 494 in total. This includes insurance, servicing and roadside assistance. As I mentioned before, you hand back your keys after the 5 year period and have nothing to show (except for five years of easy motoring) for your hundred and fifty odd thousand. You also need to put a deposit down of two months but you get your deposit back with interest.

On the converse there’s the option to buy the car yourself and pay it off monthly. The entry level Picanto is R99995 so paying it off monthly you’re looking at R2258 without a deposit. You’re already about R600 cheaper and you get to own the car at the end. However where it gets interesting is the issue of insurance (let’s assume R500 per month) and since there is no service plan you’re looking at about R2000-R3000 per year in servicing costs. Let’s throw in a set of tyres over the five year period at a further R3000 and all those costs added up you’re looking at about R2803. If you haven’t fallen asleep by my numerical skills you’ll know we’re still saving over R58 per month over the cost from Ariva. Using straight lineĀ depreciationĀ of 10% per year over 5 years you could theoretically sell the car for R50000 at the end of the period. Take the monthly costs, subtract the selling price and you end up with a cost of R101362 over the life of the car.

I’ve made a massive assumption that this is the entry level Picanto model but even at the top of the range (R2936 monthly) you’ll still spend about ten thousand rand less over the five years. Ariva might look appealing but do the numbers first.

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