Lease, HP, PCP ..?

Bmth100

Hi all,

My wife and I got our first car in Jan 2014, after leaving university. We took a Hire Purchase on a VW Polo, but actually never really intended on owning the vehicle.

We're now looking at Qashqais; Nissan want ~£3-350 a month for the sort of model we want, but again, we have no intention of ever wanting to keep the car. For life, we'll probably be quite content to switch out the car every 3-4 years for something new.

I've noticed now that you can lease cars from a number of different companies / websites for literally half the monthly payment .. if we never have any intention of purchasing the vehicle, is there any catch to leasing?

Sorry if this is a silly question, but we are clueless when it comes to cars and car finance. I am regularly the butt of jokes from my mates who know so much about them and think that car finance is a rip off ..

F1F93

HP: Highest deposit, highest monthly payments, but you'll have quite a bit of equity in the car at the end of the term as you owe nothing and own the car.

Lease: Very little deposit, very little monthly payments but you will have no equity in the car.

PCP is in the middle - low deposit, payments are similar to lease but often higher, but you have the option to purchase at the end of the agreement and may have some equity in the car.


The main catch being that at the moment, you have an asset, with some finance. Hopefully the finance is less than the car is worth and so you have equity. You can then use your car as a deposit on the next one.

With leasing, there is no possibility of this. You hand back the keys and walk away. For your next deal, you have to pay a cash deposit. However, monthly payments are so much cheaper that this shouldn't be an issue.

Bmth100

F1F93 wrote: »

HP: Highest deposit, highest monthly payments, but you'll have quite a bit of equity in the car at the end of the term as you owe nothing and own the car.

Lease: Very little deposit, very little monthly payments but you will have no equity in the car.

PCP is in the middle - low deposit, payments are similar to lease but often higher, but you have the option to purchase at the end of the agreement and may have some equity in the car.


The main catch being that at the moment, you have an asset, with some finance. Hopefully the finance is less than the car is worth and so you have equity. You can then use your car as a deposit on the next one.

With leasing, there is no possibility of this. You hand back the keys and walk away. For your next deal, you have to pay a cash deposit. However, monthly payments are so much cheaper that this shouldn't be an issue.

Maybe this is the problem; as recent graduates, we had little to use as a deposit and paid something like £100. As a result, 26 months into a 48 month agreement, our finance is £8,500, but value £6,000. About 10 more months til it levels out

F1F93

Yes, the above assumes that you finish the agreement.

TeamPlum

Be aware of the other conditions imposed. Mileage limits and repair to damage at the end of the term, to name but two.

Remember this is a moneysavingforum so I'm obligated to ask why you can't buy a cheaper car outright, and save up?