PCP Vs Lease

mrsmortgage

I'm about to order my car via either PCP or lease. I originally was very much for a lease but the salesman convinced me to go for a PCP.  I came home and ran the numbers over the period and it looks like a lease is still cheaper (albeit marginally). 

I might consider buying upfront but due to depreciation, seems s bit silly to lock so much money on it. 

Grumpy_chap

This would be better kept in the other thread.

motorguy

mrsmortgage said:

I'm about to order my car via either PCP or lease. I originally was very much for a lease but the salesman convinced me to go for a PCP.  I came home and ran the numbers over the period and it looks like a lease is still cheaper (albeit marginally). 

I might consider buying upfront but due to depreciation, seems s bit silly to lock so much money on it. 

The salesman is much more likely to be getting a commission off the PCP rather than a lease, so bear that in mind.

Whats the APR for the PCP deal?  They are notoriously bad right now on most new cars that are in short supply.  

However if its a high value asset that you absolutely intend to return at the end of the term then its about monthlies and deposit v monthlies and deposit on a lease.

As per your other thread, you pay stand a better chance of actually getting the car if you're PCPing it through a main dealer rather than relying on getting it via a lease (which tend to go to the back of the queue)

With the PCP deal you've more consumer protection, you have the right to hand the car back with nothing further to pay once you've made 50% of the cost of the finance transaction for example.  You've also the right to buy the car at the end of the term for the residual value.  You have no such right with leasing.

In todays market it would almost certainly work out considerably cheaper to buy it up front with cash / cheap loan then sell after the same set period than it would to pay a high interest PCP, so no, that wouldnt be a bit silly.

mrsmortgage

Yes, that's right they seemed to imply that for the dealership it was a better deal to get a PCP over a lease. There the protection thingy, but I'd have to have paid 50% of it. With the original  deposit I was planning, it would take 38 months to reach that point 


The interest rate they're offering is 6.7% 

motorguy

mrsmortgage said:

Yes, that's right they seemed to imply that for the dealership it was a better deal to get a PCP over a lease. There the protection thingy, but I'd have to have paid 50% of it. With the original  deposit I was planning, it would take 38 months to reach that point 


The interest rate they're offering is 6.7% 

It means you have an exit from 37 months onwards with nothing more to pay, should your circumstances change.  If you had a 48 month lease (though lease terms tend to be shorter) then you're pretty much committed to the full term.  Should you need to hand the car back for whatever reason they would pursue you for the remaining payments.

Bank loan would get you 2.8% APR but only up to the first £25K, afterwhich they get pricey.  So you could have to put in a large amount of cash to go down that route.

Did you factor in Road Fund Licence in to your calcs?  With PCP you'll have to pay it (and it'll be high if the car list price breaks the £40K threshold) whereas with lease it'll be included.

mrsmortgage

Do you mean road tax? Yes I factored it in. The PCP covers the first year. 

Herzlos

The VED will be factored into the lease too.

The MSE way would be to take the PCP for the incentives, drive home and then settle the finance with a bank loan for a much lower APR. 

mrsmortgage

Herzlos said:

The VED will be factored into the lease too.

The MSE way would be to take the PCP for the incentives, drive home and then settle the finance with a bank loan for a much lower APR. 

Yes that's what I was thinking might be the most cost effective way to do things . 

motorguy

mrsmortgage said:

Do you mean road tax? Yes I factored it in. The PCP covers the first year. 

Its not that the PCP covers the first year its that the "on the road" price of the car includes it for the first year.

So you'll have to cover it in subsequent years yourself when on the PCP deal.  It would be worth checking out how much it is because they are usually significantly elevated for the first 5 years if the list price is greater than £40K.

A lease will have that factored in for the entire term.

motorguy

mrsmortgage said:

Herzlos said:

The VED will be factored into the lease too.

The MSE way would be to take the PCP for the incentives, drive home and then settle the finance with a bank loan for a much lower APR. 

Yes that's what I was thinking might be the most cost effective way to do things . 

What incentives are being offered via the PCP to take it out in the first place?

Grumpy_chap

motorguy said:

mrsmortgage said:

Yes, that's right they seemed to imply that for the dealership it was a better deal to get a PCP over a lease. There the protection thingy, but I'd have to have paid 50% of it. With the original  deposit I was planning, it would take 38 months to reach that point 


The interest rate they're offering is 6.7% 

It means you have an exit from 37 months onwards with nothing more to pay, should your circumstances change.  

If really required, PCP offers an exit route from day 2. 
VT is very much a last resort even if early exit is required.

mrsmortgage said:

I might consider buying upfront but due to depreciation, seems s bit silly to lock so much money on it. 

The depreciation will be the same, and paid for by you, however you finance the vehicle.

You need to find the lowest cost route to having the vehicle and meeting the payments.  PCP likely comes with incentives that are worth having but if you then clear the balance early you can save the interest costs.  Best of both worlds.

How long do you intend to keep the vehicle?