PCP v Lease

Jvnolan

Help needed!!

I want to confirm the best deal. Both are for the same spec vehicle. 

1. I have a lease deal offer of 3 years. Initial £1440, then £240 per month for 35 months. That includes Road Tax.

2. PCP offer for 3 years. Initial £1400 and £230 for 35 months. I will need to pay Road Tax which is £155 a year. It is an interest rate of 5.9 per cent. 

Thoughts please….

DrEskimo

Get the car on PCP then settle next day and save on interest charges.

Jvnolan

I have looked at bank loans and it would be more then I want to pay out monthly. It’s either PCP or lease I believe. 

Nobbie1967

Financially there pretty much the same if you have the car for three years and hand back. The PCP is more flexible, since if you have a change of circumstance you can sell it and pay off the finance although you are likely to be left with some negative equity. At the end of the PCP the car might be worth more than the GFV.

Jvnolan

That’s my thoughts. Granted I may be paying for road tax but there could be some equity at the end. I don’t intend to keep more then 3 years. 

DrEskimo

Jvnolan said:

I have looked at bank loans and it would be more then I want to pay out monthly. It’s either PCP or lease I believe. 

Don't look at the monthly amount, look at the total cost.

How much will this be costing you in interest at 5.9% with a final balloon payment over the 3 yrs, relative to a bank loan? I suspect the difference is in the thousands.

The MSE thing to do would be to save up more so you need to borrow less from a personal loan (and therefore have comparable monthly payments), or look at a cheaper car.

Jvnolan

totals 

PCP - £10,145. Includes road tax
Lease - £9,800. Includes road tax

DrEskimo

Jvnolan said:

totals 

PCP - £10,145. Includes road tax
Lease - £9,800. Includes road tax

Your OP says the PCP is £1400 upfront and then £230 over 35 months? That's £9,450. VED is only payable in years 2 and 3 (first year is included in the OTR price) so that adds another £310. 

Is the total not £9,760?

My question though, is of that £9,760, we know £310 is for VED.
How much is expected depreciation (difference between discounted new price and balloon), and how much is interest charges?

ontheroad1970

That lease feels quite expensive to me.  The lack of flexibility usually leaves you with a substantial saving monthly.  

Sandtree

ontheroad1970 said:

That lease feels quite expensive to me.  The lack of flexibility usually leaves you with a substantial saving monthly.  

Really? The difference in cost between PCP and Leasing has generally been fairly modest and can go either way when I've been doing my research when looking for vehicles. I agree in principle that you'd think leasing would be cheaper because they have positive risk if the residual value is higher than they though whereas that is lost in a PCP but it just doesnt pan out in practice. 

Flight3287462

We need to know the OTR price to know whether either is a good price.  I'd be hoping the OTR is over £25k for those numbers (but in these times I suspect not).

The problem is there is no competition in the market at the moment, poor supply and fairly firm demand.