Buy or Lease

almillar

We got a loan from the Halifax online at 2.7% APR so its worth checking around.

Lots of options out there without have to use (often expensive) dealer finance.

Also PCP deals on used cars can be VERY expensive in terms of interest charges - even though the monthly payments might be more palatable.

Yep. Problem with a loan is you need to borrow the full amount, whereas you need to be at the dealer to get a PCP on a used car. My last car was bought using a loan, similar to yourself, and I've also done PCP on a 2 year old car.

Based on your imagination?

Why do you have to assume I'm making it up? What's your experience?

No, it's based on looking at BMW i3s. They were doing, from memory, PCP at 1.9% on new cars, and 10.9% on second hand ones. Satisfied?

motorguy

almillar wrote: »

Yep. Problem with a loan is you need to borrow the full amount, whereas you need to be at the dealer to get a PCP on a used car. My last car was bought using a loan, similar to yourself, and I've also done PCP on a 2 year old car.

Just be careful - with a PCP deal you ALSO borrow the full amount and pay INTEREST on the full amount (and often at a higher rate)

Used car PCP deals used to be OK - i've used them before, but dealers are now using ridiculous rates in there.

For example a 2016 BMW 530d M Sport at £31,995 from a main dealer sounds ok, and payments of a bit over £400 on a PCP deal sounds perhaps palatable - but just look at the interest charges in there - heading towards £10,000!!! :eek:

http://usedcars.bmw.co.uk/5-Series/3.0TD-530d-M-Sport-258-BHP/Belfast/3612400-606334926-3497175.aspx?srcmdc=se_na_re_

Pay it off via a personal loan over 5 years (repayments of £527 a month) and (a) its yours at the end of the term and (b) you only pay £4,000 in interest.

Mobeer

almillar wrote: »

...whereas you need to be at the dealer to get a PCP on a used car....

You can get PCP finance from 3rd parties. As an example, Halifax allow approved used cars in their scheme:
http://www.halifax.co.uk/car-finance/help/faqs/#section61425435810493

Other PCP suppliers exist - Money Saving Expert lists a few in their article:
http://www.moneysavingexpert.com/car-finance/personal-contract-purchase#where

or dare I say try Google

blackste

Im leasing at the moment, and am very happy with it. if you change your car on a fairly regular basis, its the cheapest way to do it. Even if i bought my car through drive the deal, with a 6k discount, which was offered at the time, it was still significantly cheaper to lease.

The downsides are that you can not voluntary terminate on the deal, which you can with car finance, and, if you do need to get out of the commitment, its painfully expensive.

The upsides, beside the lower cost, is that you never own something that is devaluing. If i had bought my car at list, i would have lost over 17k in the time i have had it, 18 months!!!

mgfvvc

blackste wrote: »

The upsides, beside the lower cost, is that you never own something that is devaluing. If i had bought my car at list, i would have lost over 17k in the time i have had it, 18 months!!!

That is quite scary. Around £1000 per month.

I paid £11000 for my car and I plan to keep it around ten years, so my purchase cost should work out a little over £1000 per year. Of course I have to pay for my own servicing and you are paying less than £1000 per month, but I assume your costs are a lot closer to £1000 per month than £1000 per year.

blackste wrote: »

Mortgage 11/2014 105702.90
FD CC 11/2014 5437.80
LLO CC 11/2014 5196.73
Bank of mum and dad 11/2014 11250

If you can bring yourself to buy and hold a a similarly priced car to mine the savings could pay off at your credit cards in a little over a year. Over a 5 year period, or even a 10 year period, you could make a serious dent in those debts.

motorguy

mgfvvc wrote: »

That is quite scary. Around £1000 per month.

I paid £11000 for my car and I plan to keep it around ten years, so my purchase cost should work out a little over £1000 per year. Of course I have to pay for my own servicing and you are paying less than £1000 per month, but I assume your costs are a lot closer to £1000 per month than £1000 per year.

Nobody pays list though, so the headline figure wont be a true reflection of reality.

Similarly to you - i've just bought a 2016 Passat for £15250. At 10 years old it will probably be worth £2,500 so £1,275 a year in depreciation. Getting 60mpg ish, and £20 a year road tax.

Thats all assuming i run it for 10 years. I tend to get bored but buying this one (with a loan) gives me flexibility to change when i want not when i have to - works personally for me as my circumstances vary as i'm self employed.

The reality is, i'll probably run it 3 years, and i should return around maybe £8,500 on it, which works out at £187 a month in depreciation.

jlfrs

For clarification's sake, PCH or Personal Contract Hire will always be cheaper than PCP for a new car because there is no interest. However, as previously noted, there is no "get out" clause if personal circumstances change and payments cannot be kept up. You're kept to the duration of the contract.
Once notable attraction with PCH is the fact that all running costs (not fuel and insurance), are included in the monthly fee, including road fund license. PCH's aren't usually available for anything other than new cars as far as I'm aware. It's the cost of servicing and tyres for many people, plus the low monthlies and assurance there can be no big bills to cover which make PCH so attractive for many. PCP is a close second but getting a good deal depends on A: the cost of the car in the first place - so buy a nearly new car or use a broker like Drive-The-Deal to get a new vehicle at a good price and B: the cost of the PCP product. I never take what the garage offers, use a broker like Carzu to get a 3rd party product which the dealers will often match or get close to.

Happy motoring!

almillar

Thanks for that Mobeer. A quick look at the MSE article shows APR rates of 6 or 8%+, depending on credit scoring, so undercutting lots of dealership prices for used cars, but maybe not new.
The Halifax one though (only available to customers who have had a current account with them for 3 months+) is a flat 3.3% APR, for HP OR PCP. That looks great to me for anyone wanting to PCP a used car!

kmb500

danm wrote: »

Guys. hearing the mantra to always lease a depreciating asset, but unless I am either missing something or my situation is unique, I am not sure I understand it..


Range Rover Evoque - below are rough numbers

Paid around 33K - valued today at 18,500 - 4 years old (so cost me 15K over 48 months. £310p/m)

Quick look at select leasing and I see similar car, based on same mileage would be £2200 upfront +£252 per month - or £14,300

So cost over 4 years is 15K vs 14K.... for outright versus lease...

Am I missing something- I would be paying pretty much the same, but then give the car back, versus own the asset?

Leasing a used car? Hmm, not sure about that.


I have just begun a lease on a new car and I would generally advise going with the cheaper one, but with a used car if it starts going wrong I'd imagine you stand in a better position buying than leasing as you're not totally locked into keeping the car.




Edit: Just realised you probably meant annual mileage not used mileage. If the lease has cheaper payments then go with that, in my opinion. You will be handing the car back in 4 years regardless (unless you actually want to buy it at the end). Saving £60/month in addition to tax and breakdown cover (which is usually covered in leases not always in PCPs) seems a no brainer to me.

Cornucopia

Going back to the OP for a moment...

danm wrote: »

Guys. hearing the mantra to always lease a depreciating asset, but unless I am either missing something or my situation is unique, I am not sure I understand it..


Range Rover Evoque - below are rough numbers

Paid around 33K - valued today at 18,500 - 4 years old (so cost me 15K over 48 months. £310p/m)

Quick look at select leasing and I see similar car, based on same mileage would be £2200 upfront +£252 per month - or £14,300

So cost over 4 years is 15K vs 14K.... for outright versus lease...

Am I missing something- I would be paying pretty much the same, but then give the car back, versus own the asset?

Yes, you are missing something. Your two sets of figures are measuring two different things.

Your lease figure looks a little light to me, but okay, let's go with that. So the cost to use the car for 4 years is £14,300. Then give the car back, or if it was a PCP, pay off the rest.

Your new car costs £33k - so there is £33k to find or borrow, and some costs potentially associated with that (which you need to include).

After 4 years, the car is worth £18500, and that means that the depreciation has cost £14500 - pretty close to the lease figure, which makes it tempting to compare them. However they mean subtly different things. If we look at the outright purchase like a PCP, you would have put down £14500 at the start, used the car for 4 years, and still had £18500 to pay at the 4yr point. Expressing the deal the way you have, you are double counting the value of the car at the 4yr point.

The lease and the outright purchase costs are therefore similar, which is what you'd expect (especially if, in reality, your £252pm is a little light of what it should be and the lease cost is that much higher).