Personal Lease, PCP, buy outright?

heronbommie

I change my car pretty regularly, every 2 to 3 years, now is the time for a new one and I've been mulling over how to 'purchase' it.

I've built up quite a bit of equity in the car which I'm starting to think is the wrong thing as every month it loses value. To get a similar car equals more cash and will lose value as I drive away from the dealership. So my plan is to sell it and take out a personal lease.

The plus side is that I get a wodge of cash, and the outlay over 2 to 3 years is the minimum it could be for that particular car.

I'm trying to find a negative or a reason to take a PCP instead, but from what I've seen the outlay over the same period is higher.

Is there a catch.

forgotmyname

Take a personal lease your still paying the depreciation on the lease car. Also your locked into a lease, if your circumstances change the lease still needs to be paid. Also beware there charges for any damage they claim is beyond fair wear and tear.

Made up numbers here but its just the idea..

You lease a car thats £20,000 new. After 2 years its worth £10,000 so the lease company charge you £10,000 over the 2 years + a £3000 deposit which is their profit/buffer in case the cars worth less than they estimated.

So you pay £13,000 for 2 years and have nothing at the end.

If your into saving money, Buy a 2 or 3 year old car and run it until its 5 or 6 years old.

I stopped spending lots on cars and my bank account is healthier for it.

heronbommie

I like cars and I don't mind spending money on them but I also like value for money.

I tend to buy new or nearly new, but thats a different discussion.

Real figure examples, same car (£22,000 retail price) over 3 years-

PCP = £12,000
Lease = £10,000

Same initial deposit but monthly payments are significantly higher on PCP.

Yes the depreciation is being paid, but all cars lose money, but the overall cost of the same car over the same period is a 20% saving.

motorguy

forgotmyname wrote: »

Made up numbers here but its just the idea..

You lease a car thats £20,000 new. After 2 years its worth £10,000 so the lease company charge you £10,000 over the 2 years + a £3000 deposit which is their profit/buffer in case the cars worth less than they estimated.

So you pay £13,000 for 2 years and have nothing at the end.

Not quite.

The lease company are buying cars in massive volumes and often working directly with the manufacturer / distributor.

For example, heres a Fiesta ST-2, list price £18,395

Deposit £839.94+VAT = £986.92

24 monthly payments @ £139.99+VAT = £3947.71

Admin fee = approx £200

Total payable £5134.63 including VAT.

https://www.firstvehicleleasing.co.uk/car-leasing/ford/fiesta/fiesta-hatchback/1.6-ecoboost-st-2-3dr

Compares very favourably with your theory of 1/2 the value of the car + £3,000.

motorguy

heronbommie wrote: »

I like cars and I don't mind spending money on them but I also like value for money.

I tend to buy new or nearly new, but thats a different discussion.

Real figure examples, same car (£22,000 retail price) over 3 years-

PCP = £12,000
Lease = £10,000

Same initial deposit but monthly payments are significantly higher on PCP.

Yes the depreciation is being paid, but all cars lose money, but the overall cost of the same car over the same period is a 20% saving.

The "advantages" of a PCP deal are that you have an option to buy at the end, you can trade the car in and take advantage of any equity remaining, and you have the Consumer Credit Act behind you should you need to terminate the contract early.

Try to terminate a lease early and they'll pretty much bill you for the remaining payments.

motorguy

forgotmyname wrote: »

So you pay £13,000 for 2 years and have nothing at the end.

Buy any new car and sell at two years old and you're going to be down a significant amount anyway.

If you were paying £20K for a new Focus, and sold it after two years for £9K, you'd have nothing for your £11,000 at the end either.

The "trick" with leasing is to spot the "deal" and buy based on that. Instead of say saying "i want a white Audi a4 2.0TDI with 18 inch alloys, half leather, NAV and a sunroof", you need to say "i want a german saloon car with a diesel engine" and see what deals are out there.

albionrovers

My new lease is a 30K car. 3+23. 10K mileage. £229/month inc VAT. I have no idea how they are making any money on this one? Anyone?

motorguy

albionrovers wrote: »

My new lease is a 30K car. 3+23. 10K mileage. £229/month inc VAT. I have no idea how they are making any money on this one? Anyone?

They'll be buying it at a lot less than you or i would in the first instance, and working on thin margins but high volume.

forgotmyname

I did say made up numbers. But the principle is there. Your paying off what they estimate the loss in value to be.

Trying to think what the Ford scheme was a fair few years back, Where they sold you an almost new ex-lease car for a pittance less than the price of a new one.
Reading an article that said the lease company probably bought the cars for a lot less than any buyer could. Then sell them back to ford with less than 20k on the clock for very little loss.

Ford then get to flog them to private buyers with the pretention the buyer is getting a great deal.

Great deal for the lease company and Ford got to register more cars and the profit comes selling them to private buyers.

Was it the first options scheme or is that a newish one?

heronbommie

albionrovers wrote: »

My new lease is a 30K car. 3+23. 10K mileage. £229/month inc VAT. I have no idea how they are making any money on this one? Anyone?

These are the numbers Im seeing and if you compare the same car on a PCP, which is apparently the accepted norm these days for new cars, then the outlay over the same period can work out a great deal higher.

I understand the option to buy at the end but most people dont do that they take out another PCP with the inferred deposit they have in their current car. Bit this money is there due to the higher monthly figure paid.

SmellyPetrol

motorguy wrote: »

The "advantages" of a PCP deal are that you have an option to buy at the end, you can trade the car in and take advantage of any equity remaining, and you have the Consumer Credit Act behind you should you need to terminate the contract early.

Try to terminate a lease early and they'll pretty much bill you for the remaining payments.

Had a mate looking to end his lease early - got a doc through from the lease company about it - tried to copy n paste but wont do it (think cos its a pdf).

here the link anyway http://www.alternativeroutefinance.co.uk/pdfs/Leaving_your_lease_car_early.pdf