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Seven tips on leasing a new car during the crisis

In the midst of the economic uncertainty surrounding the state of emergency, have you been wondering whether now is the right time to take out a new loan or lease? The answer to that question is based on need and on the principles of responsible borrowing.

Martin Ilves, Coop’s head of Corporate Leasing, has seven tips for anyone currently looking to buy a new vehicle that will help them make the smartest decision under the circumstances.

1. Be realistic about whether you need a new vehicle
Whenever the bottom falls out of the economy, your focus should be on saving money rather than spending it: as long as uncertainty reigns in terms of your income, avoid major investments. Not that this means life has to come to a standstill. In fact, the state of emergency may well have given you another, arguably more pressing reason to buy a new car – after all, driving yourself to work or to the supermarket or pharmacy is undoubtedly safer at the moment than using public transport or ride-sharing, since it brings you into contact with fewer people. If you’re convinced you need a new car, and you know you can afford it, there’s no need to put off buying one, since apart from anything else you might get one for a better price during the crisis anyway.

2. Choose the most practical option
Once you’ve decided to buy, weigh up what you need from the car itself. Will you mostly be using it for trips around the city, or heading out into the countryside? What sort of distances will you be covering? What kind of driving experience are you looking for? How big does it need to be? What sort of fuel consumption will you be happy with? Do you really need a brand new car, or would a used one do? Since there’s no knowing how long either the state of emergency or the economic downturn that comes with it will last, choose the most practical option for you. In this case at least, listen to your head, not your heart.

3. Scour the market for the best offer
Statistics from March show that there’s been a sharp drop in sales of new cars in Estonia: as much as 24.5% down on the same period last year. This figure is likely to be even higher for April, with around half as many vehicles being leased compared to before the state of emergency. Whenever demand falls away, prices tend to become more favourable for buyers. A number of importers are currently selling surplus stock of new cars at discounted prices, and if you manage to find the best deal, you could end up getting a new car for the price of a used one. Since a sense of security is so important in uncertain times, it’s also vital to ensure that any new car comes with a warranty.

4. Err on the side of caution when it comes to your ability to meet your repayments
You should aim to buy a car that costs no more than 18 times your monthly salary. For example, if you earn 1500 euros a month, aim to buy a car with a price tag of max. 27,000 euros. That way your leasing payments won’t be beyond your reach. Also bear in mind that your financial obligations as a whole shouldn’t account for more than 40% of your total monthly income. Since we can’t be sure how long the state of emergency will last or what its true economic impact will be, any obligations you take on should be based on the principles of responsible borrowing so that you can keep up with your repayments even if your sources of income temporarily dry up.

5. Calculate how much leasing will cost you in total
When calculating the costs associated with leasing, take everything into account – not only your monthly payments, but also the contract fee, any interest you’ll be charged, the cost of getting the car insured and serviced and how much you’ll have to pay over time for fuel. The annual percentage rate and payment schedule will be of help here, the amounts of which may fluctuate if your leasing contract is linked to Euribor – which has been negative for the last few years, but which has recently started to rise. However, experts say there’s no reason to assume it will hit a level any time soon that will affect loan and leasing payments to any significant extent.

6. Weigh up your chances of selling the vehicle on
Consider the resale market when choosing which car to buy and go for one you’re likely to have a better chance of selling on if you need to. Coop’s leasing statistics from 2019 show that the most popular people movers (which is to say those considered most reliable) are those manufactured by Toyota, Škoda, Kia, Opel and Volkswagen. There’s also higher demand on the resale market for well-known makes and models.

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7. Buy your car contact-free
You can choose your car without setting foot outside your front door by picking the one you want from the dealer’s online store or on a used car site. Pay more attention to hygiene than you normally would if you decide to take the car for a test drive, but the entire purchase and leasing process can in fact be done contact-free from the comfort of your own home.

You can lodge your Coop Leasing application online, after which you’ll be informed by e-mail or over the phone as to whether it’s been approved. Leasing contracts are signed digitally via the Dokobit portal, where you can use Mobile ID, Smart ID or your ID card for signing. Cars valued at up to 25,000 euros can be acquired with a 0% downpayment, and those valued at up to 15,000 euros require no face-to-face identification. Cover can be added straight away with the help of one of Coop’s insurance brokers.

A certain amount of contact is normally unavoidable when a vehicle is handed over to the buyer, but innovative sellers have started offering a contact-free option by leaving the keys in e.g. a Cleveron self-service locker.

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