Car on PCP or contract hire?

unexploded

Hi all,

I'd imagine you've probably answered this question a thousand times before but I'm sure you can understand each person's circumstances are slightly different. Any help would be greatly appreciated anyway!

Basically, I currently have a MINI Cooper (used, 6yrs old) on finance. Only had it a year, and I've already spent nearly £1,000 on it in repairs (most of which aren't considered wear and tear repairs). So I want to get rid of it - paying a lot of money for it and it's expensive to run.

I owe about £5,500 on finance. The car is worth between £5,000 - 5,500. So I won't be out of pocket much.

As I've been completely put off used cars, I'm looking at Personal Contract Plans or contract hiring. I'm looking at a new VW Polo SE.

If I go with Volkswagen themselves, after haggling, they'll give me one on PCP for £169 p/m with £2,000 deposit, 36 months. After that I can use it as a deposit for another VW on PCP, give it back or buy it at their calculated market value.

I've also been looking at contract hire through leasing companies. I can get a Polo SEL (much better trim) for £157 p/m with £1,000 deposit, for 24 months (not much difference for 36 months either). Now, I understand with that, that after the hire term I won't have any interest in the car - ie, they won't offer it to me at a preferential price or offer it as deposit against another car.

If that is true, which way do you think I should go? I understand in the long run I'll never own a car on contract hire but that doesn't bother me. A car's a car. At the same time, the idea of using that car as deposit for a new car in three year's time (purchased on PCP) sounds good, but I'm paying alot more for that privilege.

I'd appreciate your thoughts! Thanks!

(ps, VW did offer to pay off the finance one the MINI but they wanted £240 per month off me for the Polo - I did, of course, tell them where to go).

forgotmyname

Your £2000 deposit gives you 4 years in a car thats less than 2 years old each time.

Depends if you want to actually own a car or just rent a shiny one every couple of years?

unexploded

Well this is it... not particularly bothered about calling the car "mine".

It's whether I pay £2,000 now, and pay a little extra month... and in three year's time potentially I won't have to pay another deposit and get another new car.

Or £1,000 now, and in 2 or 3 year's time pay that deposit again for another contract hire term.

Not sure what to do!

Doozergirl

Well, I looked very closely into this about three years ago and I ended up with PCP. I knew no-one at the time who had a lease car but since then I've heard some rather horrid stories from people about what happens when you give a lease car back since then which makes know I made the right decision simply based on that.

That aside, the reason I chose PCP was that I knew I could give up the car at any point if I needed to by selling it. And whatever I'd done to it in terms of additional damage, excess mileage etc would simply be reflected in the price I sold it for rather than being surprised by extra bills at the end of term. I compared prices by putting down a deposit on PCP similar to that on a lease car and comparing over the same amount of time (3 years). I pay about the same to MINI on PCP than for a lease car, but I've bought my MINIs a few months old - so not brand new, but as good as dammit. But I build up equity really quickly in a MINI. Because someone had already bought it, I'm not paying that initial showroom depreciation, I'm paying the subsequent depreciation which is a lot less.

After a year of a MINI Cooper, I spotted a bargain in a top specced Cooper S Clubman. Because I was on PCP, I was simply able to trade it in. I got a fantastic part-ex deal on the Cooper, was already virtually out of negative equity, paid it off, started again on the Clubman with exactly the same deposit and monthly payments. The Clubman is simply not depreciating - after two years the dealers are still selling cars with the same birthday for about £600 less than I paid - with all that wear and tear! So even with a small deposit, after nearly 2 years I've got a really lovely amount of equity, even if I simply trade it in. I'm paying the interest but the portion of each monthly repayment going towards the capital repayment is now virtually just building equity. With the amount that is paying off more than the car is depreciating by, I'm only 'losing' about £160 a month for a car that cost £22k new.

And I love, love, love my car!

It won't be like that for every car, but I'd consider MINI again simply because of the slower depreciation. It would be interesting to know how much your one has cost you in deposit and repayments since you bought it, to compare...

vikingaero

One thing to be wary of is the mileage limits. Does it fit in with your anticipated mileage? There's no point going for a cheap deal with only 6,000 miles per year when you may cover 20k per annum. Does your mileage vary each year? Chance of promotion where you may become a road warrior?

unexploded

Thanks for your replies people.

Doozergirl, I'm aware of the horror stories too. My parents had a right old hoo har with Mercedes. However, my brother has always contract hired BMW and has had a very good experience (albeit on one occasion they tried charging him ridiculous money, in the end he got away with it). It seems you've had a good experience with your MINI on PCP. I bought my MINI on finance second hand from another garage. I think at the time it was worth probably £6,600, with the finance over four years it's costing about £9,000. Stupid money really. I'm paying about £179 a month. Hence me wanting to get out of it.

The PCP is appealing because as you've pointed out you can put it against another car or walk away from it.

But in my situation, I've started up my own business so I'm having to bring in the reins a bit, understandably. So with contract hiring - I'm paying less, but I don't have any equity. But perhaps in three years I'll hopefully be earning enough to pay more for that privilege!

The company that quoted the SEL on contract hire by the way, will do the SE for the same price but on three years... (which is weird... I thought it cost less per month if you pay over three years...)

Anyway, I've spoke to a friend who used to be in car sales and he personally would go for contract hire. I don't know what to do haha!

unexploded

vikingaero wrote: »

One thing to be wary of is the mileage limits. Does it fit in with your anticipated mileage? There's no point going for a cheap deal with only 6,000 miles per year when you may cover 20k per annum. Does your mileage vary each year? Chance of promotion where you may become a road warrior?

Vikingaero, yes I've requested 12,000 mi p/a, I did that last year and fairly confident that's what I'll be doing every year.

Biglad_3

Why are you looking at the VW Polo so specifically? Do you know that the Skoda Fabia can be bought VAT free (20% off list price) at the moment. Likewise SEAT with the Ibiza are doing VAT free or 1/2 VAT off deals. Both are VW Polos just with different badges however their significantly lower prices with the VAT off could save you a pretty packet.

unexploded

Biglad wrote: »

Why are you looking at the VW Polo so specifically? Do you know that the Skoda Fabia can be bought VAT free (20% off list price) at the moment. Likewise SEAT with the Ibiza are doing VAT free or 1/2 VAT off deals. Both are VW Polos just with different badges however their significantly lower prices with the VAT off could save you a pretty packet.

Valid point there Biglad. Tbh I just like the look of the Polo, don't particularly like the look of the Fabia or Ibiza. Also, and not such a great excuse, but I did look at the Fabia on the Skoda website. Crap website, hardly any info. My issue is I need quite a bit of boot space, and the Polo has it. Couldn't even find any litre or dimension info on the Skoda site.

But you're right, I am paying more for a badge on what is essentially the same car. I have no loyalty to any particular brand nor do I care much about cars in general but the Polo took my eye, and I test drove one and I liked it.

About the PCP - I spoke to a friend who worked in Volks/Audi finance many moons ago and he told me to steer clear of PCP haha! Plus with paying more deposit it seems like I'm not really getting a great deal. But having some sort of equity at the end is appealing...

anotherbigspender

Whatcar and click 'perfomance and measurements'

On paper the Polo has the smallest boot space of the three.

unexploded

Ahaaar thanks for that!