PCP v Lease - Help!

Jvnolan

Looking at a new Kia Pro Ceed GT line. 

I have the following on lease:

3 years, 8k miles a year.

£736 deposit. 

£245.60 x 35 months. 

£100 admin fee. 

The following on PCP:

Interest rate 5.9%
8k miles a year.

£1000
£319.42 x 36 months
Ballon payment - £11.898.25 (not likely to keep the car)
Total car price - £26.647.37. 

Please can someone help me crunch the figures and tell me best option. 

Herzlos

Lease: £9432

PCP: £12,499

PCP would give you a lot more flexibility in terms of changing car earlier, keeping it at the end, excess mileage and so on, but the lease is about a quarter cheaper so if you're not planning on keeping it it's probably the better option.

Grumpy_chap

Is this thread any help?
https://forums.moneysavingexpert.com/discussion/6335075/pcp-v-lease/p1

iwb100

Not sure what you are asking here, the lease is obviously cheaper when you factor in the costs plus you add road tax after year one onto your PCP.

The thing with PCP is you’d almost certainly have equity in the deal after say year 2 based on the current market and that would obviously probably mean you could swap the car for a new one and with a chunk of equity to roll on. So that would in all likelihood balance out and probably outweigh the extra cost. 

But the market won’t necessarily be in your favour in two or three years time.

So you are gambling on the market. Or paying more for flexibility that PCP offers that PCH doesn’t.

Nobody can tell you which will work out the best without a crystal ball. The car you have chosen doesn’t seem to suffer from huge depreciation. 44% over three years - so that’s obviously suggesting at the end you’d have considerable equity. But as I say that depends on the market between now and then. 

DrEskimo

Jvnolan said:

Looking at a new Kia Pro Ceed GT line. 

I have the following on lease:

3 years, 8k miles a year.

£736 deposit. 

£245.60 x 35 months. 

£100 admin fee. 

The following on PCP:

Interest rate 5.9%
8k miles a year.

£1000
£319.42 x 36 months
Ballon payment - £11.898.25 (not likely to keep the car)
Total car price - £26.647.37. 

Please can someone help me crunch the figures and tell me best option. 

I get to £24,397.37 if I add up the deposit, monthlies and balloon payment. Where did the £26,647 come from?

How much is the actual car after discount? How much are you financing after the £1,000 up front?
It's irrelvant if you want to keep the car after 3yrs or not. You can trade the car in to a dealer in exactly the same way, regardless of whether it has PCP finance on it or not.

The PCP gives you the option to hand back to the finance company for the balloon payment for that single day at the end of the term (subject to additional excess mileage and wear and tear charges), but you have to consider whether that option is worth the additional cost of interest. If the car is worth more, and you simply trade in to a garage (as the vast majority do), then it's just cost you thousands in interest above what you could have paid by simply settling the finance by cash or using a cheaper loan.

Of course, now you are no longer wedded to new PCP car deals, you can look to buy a used car with low cost finance, and instead trade that in every few years and reduce the depreciation costs too.

Look at each cost individually (expected depreciation, interest, servicing, maintenance, warranty extensions, fuel, VED) when looking at car costs. Look to minimise each.

The lease rolls all that into 1, but I suspect when you look at reducing the interest costs, and consider a higher than expected residual value on even a new car, the cost of ownership difference between owning the new car outright vs the lease is nearly the same (without being tied into a punitive contract).

iwb100 said:

Nobody can tell you which will work out the best without a crystal ball. The car you have chosen doesn’t seem to suffer from huge depreciation. 44% over three years - so that’s obviously suggesting at the end you’d have considerable equity. But as I say that depends on the market between now and then. 

THe £26k (although above I get £24k) includes the interest charges from the PCP as well, so the denominator is much lower.

iwb100

DrEskimo said:

Jvnolan said:

Looking at a new Kia Pro Ceed GT line. 

I have the following on lease:

3 years, 8k miles a year.

£736 deposit. 

£245.60 x 35 months. 

£100 admin fee. 

The following on PCP:

Interest rate 5.9%
8k miles a year.

£1000
£319.42 x 36 months
Ballon payment - £11.898.25 (not likely to keep the car)
Total car price - £26.647.37. 

Please can someone help me crunch the figures and tell me best option. 

I get to £24,397.37 if I add up the deposit, monthlies and balloon payment. Where did the £26,647 come from?

How much is the actual car after discount? How much are you financing after the £1,000 up front?
It's irrelvant if you want to keep the car after 3yrs or not. You can trade the car in to a dealer in exactly the same way, regardless of whether it has PCP finance on it or not.

The PCP gives you the option to hand back to the finance company for the balloon payment for that single day at the end of the term (subject to additional excess mileage and wear and tear charges), but you have to consider whether that option is worth the additional cost of interest. If the car is worth more, and you simply trade in to a garage (as the vast majority do), then it's just cost you thousands in interest above what you could have paid by simply settling the finance by cash or using a cheaper loan.

Of course, now you are no longer wedded to new PCP car deals, you can look to buy a used car with low cost finance, and instead trade that in every few years and reduce the depreciation costs too.

Look at each cost individually (expected depreciation, interest, servicing, maintenance, warranty extensions, fuel, VED) when looking at car costs. Look to minimise each.

The lease rolls all that into 1, but I suspect when you look at reducing the interest costs, and consider a higher than expected residual value on even a new car, the cost of ownership difference between owning the new car outright vs the lease is nearly the same (without being tied into a punitive contract).

iwb100 said:

Nobody can tell you which will work out the best without a crystal ball. The car you have chosen doesn’t seem to suffer from huge depreciation. 44% over three years - so that’s obviously suggesting at the end you’d have considerable equity. But as I say that depends on the market between now and then. 

THe £26k (although above I get £24k) includes the interest charges from the PCP as well, so the denominator is much lower.

The advantage of PCP is he doesn’t have to wait till the end to change cars. He can just at any point decide to settle and change cars. Obviously normally relies on positive equity but in the current market it’s possible a new car like that is worth more than he paid for it after 6 months of ownership, but the market won’t last forever.

The APR on the PCP is not very good though and I’d expect to be able to get 2.8% from a bank which would be a saving of around £45 a month. Which is very considerable. Though that assumes there is no manufacturer discount or deposit contribution linked to the PCP. And the Kia website indicates they include a £2250 contribution which would mean that PCP is better and obviously taking it then clearing it with cash or bank loan best.

motorguy

Jvnolan said:

Looking at a new Kia Pro Ceed GT line. 

I have the following on lease:

3 years, 8k miles a year.

£736 deposit. 

£245.60 x 35 months. 

£100 admin fee. 

The following on PCP:

Interest rate 5.9%
8k miles a year.

£1000
£319.42 x 36 months
Ballon payment - £11.898.25 (not likely to keep the car)
Total car price - £26.647.37. 

Please can someone help me crunch the figures and tell me best option. 

If you're going to drive it three years then move to another car, the lease is the cheapest.

I'd seriously consider buying it and keeping it if i were you - and if you do go down that route, you'd be better off with a cheap loan (as low as 2.9%APR available) and put it over a longer period

iwb100

motorguy said:

Jvnolan said:

Looking at a new Kia Pro Ceed GT line. 

I have the following on lease:

3 years, 8k miles a year.

£736 deposit. 

£245.60 x 35 months. 

£100 admin fee. 

The following on PCP:

Interest rate 5.9%
8k miles a year.

£1000
£319.42 x 36 months
Ballon payment - £11.898.25 (not likely to keep the car)
Total car price - £26.647.37. 

Please can someone help me crunch the figures and tell me best option. 

If you're going to drive it three years then move to another car, the lease is the cheapest.

I'd seriously consider buying it and keeping it if i were you - and if you do go down that route, you'd be better off with a cheap loan (as low as 2.9%APR available) and put it over a longer period

How do you know lease is cheapest? It will depend on the value of the car. 

Also the PCP deal includes a £2250 contribution from Kia so absolutely should take the PcP for that and then pay it off. But OP has already said they don’t want to keep it…

DrEskimo

iwb100 said:

motorguy said:

Jvnolan said:

Looking at a new Kia Pro Ceed GT line. 

I have the following on lease:

3 years, 8k miles a year.

£736 deposit. 

£245.60 x 35 months. 

£100 admin fee. 

The following on PCP:

Interest rate 5.9%
8k miles a year.

£1000
£319.42 x 36 months
Ballon payment - £11.898.25 (not likely to keep the car)
Total car price - £26.647.37. 

Please can someone help me crunch the figures and tell me best option. 

If you're going to drive it three years then move to another car, the lease is the cheapest.

I'd seriously consider buying it and keeping it if i were you - and if you do go down that route, you'd be better off with a cheap loan (as low as 2.9%APR available) and put it over a longer period

How do you know lease is cheapest? It will depend on the value of the car. 

Also the PCP deal includes a £2250 contribution from Kia so absolutely should take the PcP for that and then pay it off. But OP has already said they don’t want to keep it…

It doesn't matter if they don't want to keep it.

If they settle the PCP straight after they can trade it in after 3yrs all the same. Or indeed at any time before or after.

Saving on interest will save them money overall whether they keep it 1 month, 1 year or 10 years.

iwb100

DrEskimo said:

iwb100 said:

motorguy said:

Jvnolan said:

Looking at a new Kia Pro Ceed GT line. 

I have the following on lease:

3 years, 8k miles a year.

£736 deposit. 

£245.60 x 35 months. 

£100 admin fee. 

The following on PCP:

Interest rate 5.9%
8k miles a year.

£1000
£319.42 x 36 months
Ballon payment - £11.898.25 (not likely to keep the car)
Total car price - £26.647.37. 

Please can someone help me crunch the figures and tell me best option. 

If you're going to drive it three years then move to another car, the lease is the cheapest.

I'd seriously consider buying it and keeping it if i were you - and if you do go down that route, you'd be better off with a cheap loan (as low as 2.9%APR available) and put it over a longer period

How do you know lease is cheapest? It will depend on the value of the car. 

Also the PCP deal includes a £2250 contribution from Kia so absolutely should take the PcP for that and then pay it off. But OP has already said they don’t want to keep it…

It doesn't matter if they don't want to keep it.

If they settle the PCP straight after they can trade it in after 3yrs all the same. Or indeed at any time before or after.

Saving on interest will save them money overall whether they keep it 1 month, 1 year or 10 years.

Oh agreed. That’s what I’d do. Take the PCP for the dealer contribution get a loan at 2.8 pay it off and then free to do what they want with the car at any time.

It’s just they were being advised to buy and keep which isn’t their plan. 

Jvnolan

Thanks all