Finance or buy a used EV

qwertyqwerty

Hi there, I have decided to take the plunge and go fully electric.  Have found the car I would like (Bmw i series), but unsure if I should buy outright with cash or take a PCP deal at 7.9%.
The reason for considering the PCP is due to not being sure how much the EV market will advance in the current years, so better tech, more cars on offer resulting in massive depreciation of current cars.
The car is priced at 35k, I can purchase by taking the money out of my recently matured 5% ISA, pros being I have no monthly rate to pay, con being the car could depreciate in value potentially.
alternatively I can take a PCP deal with a 5k down payment and monthly payments of £400 for 12k mileage limit over 3 years, this would cost me 20k over the three years with an option final payment of 20k.  Pros being i can return the car if better EVs appear at 3 years, cons being the car will cost me 6k more if I decided i wanted to keep it.

Looking for advice from anyone who has purchased a used EV before, many thanks

ididgetwhereiamtoday

You can ‘return’ a used EV anytime by trading it in. 

Spend £20k on a 3 year old car will still be worth at least £10k after 3 years so will only have cost you £10k over 3 years ownership. 

Goudy

The car will depreciate, they all do (bar the odd classic).

The industry is saying it'll lose £15k in three years.
They don't often get these figures wrong, otherwise they go out of business but there is often a bit of leeway in this figure.
Some early data of EV values was off a little as data was thin on the ground, but there is now years of data for EV values.

It's basically it's trade price, it's what all the industry data is telling them it'll be worth through the auctions at that point in it's life.
This figure might be more if you trade it in, more still if you sell it privately or less if the industry has got all it's data wrong. (how likely is that?)

So you can lose £15k plus all the interest on £35k at 7.9%.
That's guaranteed if you hand it back at the end of the contract or pay the final payment and keep it.

Or pay up cash and lose around £15k.
This could be less, it could be more.

(400x36 = 14,400 + 5000 + 20,000 = 39,400, so 4,400 interest over the loan)
So you have to weigh up is all that interest worth covering off the difference IF the industry data is wrong.

To me, the car would need to be at risk of losing an extra £4,400 to make it worth it.
Do you believed they could have over valued the GFV by this amount?

qwertyqwerty

Thanks for the replies, helpful. It seems it may be worth taking the cash deal. I wonder if I could squeeze more out of them by taking a pcp deal, and then just paying it off, straight away?

facade

I bought an EV in September, 2 1/2 years old for 40% of the "new" price.

Admittedly I doubt if anyone ever paid "new" price, but it still seemed a good price to me.

Now there is always the possibility that a Magic New Battery Technology is just around the corner, and primitive short range lithium ion cars will drop in value to pennies, but I'm resigned to writing the full purchase price off over the next 5 years.

If it has any value above scrap at 8 years old, when the battery guarantee expires- bonus!

I'll either get a newer better model or run it into the ground for scrap value.

It never even occurred to me to use a finance product and pay interest on top of the purchase price.

(Luckily our caring Government have engineered a reduction in savings interest rates, so the loss in interest by using my savings is even smaller!)

Goudy

qwertyqwerty said:

 I wonder if I could squeeze more out of them by taking a pcp deal, and then just paying it off, straight away?

This is often a good idea if the PCP deal comes with a benefit like a deposit contribution.

Quite often these deposit contributions are only on new cars. 
Used cars on PCP tend not to attract these or if they do, it's often very small.

There are different ways to "pay it off".

Cancel the finance.
You have a cooling off period with the finance, so you can cancel it in that period.
Some have kept the deposit contribution. Others have been reinvoiced the full amount, no finance, no benefits.

Settle the finance.
You can settle the finance at any time and the consumer credit act limits the amount of interest of the settlement amount to 56 days for a large amount. (less for smaller amounts)
Settle in the first month and that's all you will pay.
As you have taken the finance, they can't take the benefits back. 

56 days is only usually a small amount when compared to a health deposit contribution of a couple of thousands pounds.
If you are going to do this, put down the maximum deposit allowable. This means you borrow less overall, so the 56 days interest is less.

Herzlos

Unless you can get near the 7.9% on savings, your best paying for the car in cash.

It's slightly more complicated because you're not paying down any capital on the GFV.

If you think you're likely to want to get rid of the car at the end of the term and think it'll be worth less than GFV - the difference in interest you're paying, then it's probably a good deal. Otherwise it'll be more flexible and cheaper in cash.

Petriix

I'd suggest looking at some of the other second hand EVs at around the £30k mark. A friend picked up an Ioniq 6 for around that at less than a year old. Otherwise there are sometimes incredibly well priced lease options which work out better than buying if you don't intend to keep it. 

If you're definitely set on that car, the PCP doesn't look that great but it's a gamble as to whether depreciation will be higher or lower than expected. 

born_again

I would echo the above to include Ionic 5 & Kia EV6

With a 3 year old BMW you are out of warranty & a car on finance, so any major issues, as others have found they end up still paying for a car that is unroadworthy or With a massive bill to pay

Just over a year ago I got a 3 year old Kia E-Niro for £24K with 8K miles. Same car now £21K ish.

TBH, might as well look at a new EV which might end up costing the same a month on a PCP deal.

DrEskimo

Bought a 2yr old used EV back in 2019. Took out pcp to get benefits and then settled straight away. The GFV on that was around £4k after 3yrs. Sold it couple of months back (so nearly 6yrs later) for £6.5k privately. Took a day on AutoTrader to sell it!

Just bought another used EV (5yr old used Model S) straight cash. 

No concerns on value to want to pay thousands more to finance companies…