Buying a new car advice

ladbrooks23

Hi can anyone help please. I’m looking to buy a new car. Ideally I can afford approximately 15k. I do have savings that can cover this amount however a friend of mine has said the best thing to do is lease a new car for 3 years then buy it at the end of the contract for what is normally way below the book price because the funder wants to liquidate the asset. Can anyone please give any advice about the best thing to do?

Martin_the_Unjust

Well the best thing to do is not buy a new car.

AdrianC

ladbrooks23 said:

however a friend of mine has said the best thing to do is lease a new car for 3 years then buy it at the end of the contract for what is normally way below the book price because the funder wants to liquidate the asset.

That's not how it works...

Your friend is confused between a lease (basically, you hire the car for the term) and PCP (you finance the purchase, you repay a proportion over the term, then you can either buy it or hand it back).

With PCP, the "balloon", the purchase price at the end, is set at the start of the contract to a level roughly equal to the expected value. You repay the depreciation, plus the interest on the entire amount borrowed. If the balloon is set too low, then you've repaid more than you needed to if you want to hand the car back. If the balloon is set too high, you pay more interest than you need to, and buying the car makes no sense.

With a lease, the car is rarely offered to you to buy. It would just go into the normal auction cycle.

Which is "better"? Which piece of string is longer?

Kattekwaad

OP there should be a glut of PCP and lease cars coming on the market towards the end of the year (repos) and I think waiting a bit and watching the market like a hawk could well pay dividends.

Petriix

Lease often works out to be the cheapest model of 'ownership' for a new car over a given period. However, if you have access to the full purchase cost at a low (or no) interest rate then outright purchase is probably cheaper. In many cases, you can access lower purchase prices by signing up for a PCP agreement. You can then settle this in full with minimal penalty.

However you finance it, I strongly recommend looking at switching to an EV.

DrEskimo

AdrianC said:

ladbrooks23 said:

however a friend of mine has said the best thing to do is lease a new car for 3 years then buy it at the end of the contract for what is normally way below the book price because the funder wants to liquidate the asset.

That's not how it works...

Your friend is confused between a lease (basically, you hire the car for the term) and PCP (you finance the purchase, you repay a proportion over the term, then you can either buy it or hand it back).

With PCP, the "balloon", the purchase price at the end, is set at the start of the contract to a level roughly equal to the expected value. You repay the depreciation, plus the interest on the entire amount borrowed. If the balloon is set too low, then you've repaid more than you needed to if you want to hand the car back. If the balloon is set too high, you pay more interest than you need to, and buying the car makes no sense.

With a lease, the car is rarely offered to you to buy. It would just go into the normal auction cycle.

Which is "better"? Which piece of string is longer?

I originally thought this, but apparently it's not uncommon to be offered to buy the car at the end of the PCH. Some people have argued that if the PCH is particularly cheap (i.e predicted to cost less than the depreciation) and then you are offered to buy the car from the lease company at a good price, you effectively get the car for cheaper than outright purchase.

However I see two issues with this approach:
1/ is far from guaranteed that you will be offered the option to buy it at the end of the leased. 
2/ the price the lease company offer is whatever they like. I have seen little evidence that they would offer the car at anything below standard market value. I don't understand why they would?

All to say, why bother going through the uncertainty and cost implications of new car depreciation. Skip the first step and just hunt around for a well priced used version to begin with. May take a few months, but worth it if you have the time and patience.

DrEskimo

Petriix said:

However you finance it, I strongly recommend looking at switching to an EV.

This! Bought my used 41kWh Zoe (battery owned so no lease) for just under the OPs £15k budget. 

A year later still worth the same amount and cost me less than £100 to drive ~5,000 miles

[Deleted User]

Another vote for an EV. Zoe, MG ZS EV, a Leaf 40, lots of options.

motorguy

Kattekwaad said:

OP there should be a glut of PCP and lease cars coming on the market towards the end of the year (repos) and I think waiting a bit and watching the market like a hawk could well pay dividends.

There will be a minimal amount of "repos".

motorguy

ladbrooks23 said:

Hi can anyone help please. I’m looking to buy a new car. Ideally I can afford approximately 15k. I do have savings that can cover this amount however a friend of mine has said the best thing to do is lease a new car for 3 years then buy it at the end of the contract for what is normally way below the book price because the funder wants to liquidate the asset. Can anyone please give any advice about the best thing to do?

How long do you plan on keeping it?

What age of car - new to you or "new"?

What type of car?

Mercdriver

Kattekwaad said:

OP there should be a glut of PCP and lease cars coming on the market towards the end of the year (repos) and I think waiting a bit and watching the market like a hawk could well pay dividends.

If too many people follow this approach, prices will increase, not fall.  Especially if capacity of manufacturing has been massively affected