Buy or Lease

Zola.

I'd love a new(er) car, and eventually I will have to replace, but I would much rather put down a decent deposit early on and pay the remainder off and hold onto it.

My current car is a VW Bora, getting on. I paid £2500 for it 6 years ago and its going as strong as the day I got it. Looks great all polished up, but time is catching up with the paint work etc

Changing cars every few years and never getting anywhere with the payments is a false economy to me. Don't get it at all Nice novelty in a shiny news car, but such a lot of cash leaking that could be invested etc. That's a boring statement I know...

motorguy

jlfrs wrote: »

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.

Whilst you're right with your assertion, thats not the reason - ultimately somebody somewhere is paying interest on the transaction, just not the end hirer. Leasing companies buy in massive bulk and get huge discounts, and borrow money at a lot less than you or i would pay. Thats why payments tend to be cheaper.

Also, its worth remembering you are just renting the vehicle which among other things means you cant buy it outright an its usually financially difficult to get out of the arrangement mid term if your circumstances change.

It does work for a lot of people, and my gut feeling is that we'll see a movement away from PCP deals to PCH deals over time until it becomes the dominant way of driving a new car.

motorguy

almillar wrote: »

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!

We've our loan at 2.7% APR for a straight personal loan through the halifax, though that was a month ago so rates might have changed.

motorguy

Zola. wrote: »

Changing cars every few years and never getting anywhere with the payments is a false economy to me. Don't get it at all Nice novelty in a shiny news car, but such a lot of cash leaking that could be invested etc. That's a boring statement I know...

Whilst it may be more expensive on paper people attach a value to the convenience of driving a new car and that can be worth it for them. Also a new car on a cheap PCP or PCH deal might be an enabler for them to commute to work reliably, economically and safely, for example.

If people can afford a new car and its not to the detriment of saving, pension, etc then grand. The risk of course is when people put a new car ahead of those things.

System

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!!!

Wow, just wow. You really do believe that you don't pay for depreciation when you lease don't you? It is factored into the lease costs. The lease company know what the market value will be at the end of your lease term and factor that into the payments. Difference is that they also whack on interest on that amount as well.

motorguy

Tarambor wrote: »

Wow, just wow. You really do believe that you don't pay for depreciation when you lease don't you? It is factored into the lease costs. The lease company know what the market value will be at the end of your lease term and factor that into the payments. Difference is that they also whack on interest on that amount as well.

Wow. Just wow. You've not taken in so many factors, have you?

Leasing companies :-

• Buy massive numbers of cars at a time therefore get massive discounts - far beyond what you or i could EVER hope to achieve
• Buy straight from the manufactuer, so saving probably several thousand in costs / profit that a dealer would take.
• They can claim the VAT element back of the cost of the car. Granted it would be recharged when the car is sold, but theres a saving there.
• They will leverage much much smaller rates of interest than you or i could hope to achieve.

bugslet

andrewf75 wrote: »

But the cheapest way of running a car is buying a few years old and keeping it longer term.

Zola. wrote: »

My current car is a VW Bora, getting on. I paid £2500 for it 6 years ago and its going as strong as the day I got it. Looks great all polished up, but time is catching up with the paint work etc

Changing cars every few years and never getting anywhere with the payments is a false economy to me. Don't get it at all Nice novelty in a shiny news car, but such a lot of cash leaking that could be invested etc. That's a boring statement I know...

Those two quotes sum it up for me.

My own motor is a Vauxhall Combo, bought it when it was 7-8 months old, with 7500 miles on the clock for £7k. That particular model, probably new would get it for £10k+.

But I'll hold onto it until it's pretty much driven into the ground. I've had a fancy car and I could do again, but it's out of my system/ I got old:p. Over it's life it will cost me way less than getting some PCP type deal.

I also do around 30- 35,000 miles a year in it for personal use, which rule out a PCP deal.

motorguy wrote: »

If people can afford a new car and its not to the detriment of saving, pension, etc then grand. The risk of course is when people put a new car ahead of those things.

Good post. That can be concerning that some people will just get something because it looks good, when money may be better spent future-proofing.

Ultimately there isn't a right or wrong, it's dependent on everyone's circumstances.