PCP/Lease question

rubble2

Me and my wife are both now in our seventies so only income is from pensions/investments etc.
We currently run two cars but are considering reducing this to one car only.

Is the following plan viable please?

We sell or trade in both existing cars witha view to taking out a PCP or lease deal on a brand new car. Because of our income situation I am guessing that getting finance may be an issue, so to avoid the hassle etc of undergoing credit checks we propose to take out a deal over 4 years after which time it is likely that we will no longer be regularly driving. 

Looking on line  we can see offers at about £300  a month for cars that would meet our requirements, I am estimating the value or both our current vehicles to be about £15,000. can we use this as an upfront payment for the full finance deal?

To clarify, we take out a deal at £300 a month for 48 months (total cost £14,400) we pay this in a lump sum and avoid any necessity for credit checks etc.

What are the pitfalls in this proposal ( I am sure that there will some negative issues that I haven't taken into consideration)

Thanks in advance

daveyjp

If you want to pay a lump sum its a straight cash deal.

My first observation is there is absolutely no need to be buying a brand new car.  With £15k equity you could be in a low mileage 2-3 year old car with years of life in it.

Keep_pedalling

 I am in a similar situation and had no problem in leasing an EV last year. I kept the upfront payment low as that kept more of my cash in savings for longer earning interest. I was looking at PCP initially but leasing turned out to be the cheaper option over 3 years. 

Altior

There's definitively an incentive for what you perceive to be your final vehicle to be a brand new one. We can't take our funds with us, assuming the OP has sufficient resources, why not! I'd be looking for a bucket list type of vehicle in that scenario. 

The other aspect is that the OP would get full warranty for at least three years, no MOT requirements for three years either.

The answer to the question, is almost certainly no. There's no way for the finance company to know that you won't spend your savings, finance is based on income. For a PCP you're financing the whole purchase (less the initial deposit).

I would go for a PCH, personally. You'd then only need to finance the monthly payments, which may be doable on your income. With PCH you can also vary the deposit (initial payment), reducing the financed amount. And no hassle at the end of the term, they just collect the vehicle. GAP insurance is a must if using that option. 

Mildly_Miffed

rubble2 said:

Me and my wife are both now in our seventies so only income is from pensions/investments etc.
We currently run two cars but are considering reducing this to one car only.

Is the following plan viable please?

We sell or trade in both existing cars witha view to taking out a PCP or lease deal on a brand new car. Because of our income situation I am guessing that getting finance may be an issue, so to avoid the hassle etc of undergoing credit checks we propose to take out a deal over 4 years after which time it is likely that we will no longer be regularly driving. 

Looking on line  we can see offers at about £300  a month for cars that would meet our requirements, I am estimating the value or both our current vehicles to be about £15,000. can we use this as an upfront payment for the full finance deal?

To clarify, we take out a deal at £300 a month for 48 months (total cost £14,400) we pay this in a lump sum and avoid any necessity for credit checks etc.

What are the pitfalls in this proposal ( I am sure that there will some negative issues that I haven't taken into consideration)

OK, so you pay your £15k equity in both current cars into a lease. You pay £300/mo over the length of that lease.
In four years time, you had that car back. You now have no equity at all, and are £30k down in four years.

You are seriously thinking "that's it, we'll never drive again" after that?
Even if you're 79 now, you'll only be 83 in 4yrs time... Old age, of course, is far more than just a number - but there are MANY people a lot older than that still driving regularly, perfectly safely.

So what then for your transport needs? Taxis, buses, trains everywhere? If you live somewhere with good public transport, of course...

Why not keep your £30k for better things, and start feeding that public transport in now, gently?
If it works for you, go down to one of your existing cars in 6-12mo. If you really think your current cars aren't suitable any more, then replace with a used car.

Don't throw tens of thousands down the depreciation pit...

born_again

We sell or trade in both existing cars witha view to taking out a PCP or lease deal on a brand new car. Because of our income situation I am guessing that getting finance may be an issue, so to avoid the hassle etc of undergoing credit checks we propose to take out a deal over 4 years after which time it is likely that we will no longer be regularly driving. 

Lease or PCP will require credit checks. They are forms of finance.
Lease you will most likely have to hand back (not many offer option to buy). PCP may be better idea, as at least you have the option to pay balloon & keep car if your are still able to drive.

Another worry with lease, would be if something happens & you are no longer able to drive, due to the fixed term nature of the lease. You have to pay for a car you can not drive.

Is there any reason that you could not just keep one of your current cars?

matt_drummer

Mildly_Miffed said:

rubble2 said:

Me and my wife are both now in our seventies so only income is from pensions/investments etc.
We currently run two cars but are considering reducing this to one car only.

Is the following plan viable please?

We sell or trade in both existing cars witha view to taking out a PCP or lease deal on a brand new car. Because of our income situation I am guessing that getting finance may be an issue, so to avoid the hassle etc of undergoing credit checks we propose to take out a deal over 4 years after which time it is likely that we will no longer be regularly driving. 

Looking on line  we can see offers at about £300  a month for cars that would meet our requirements, I am estimating the value or both our current vehicles to be about £15,000. can we use this as an upfront payment for the full finance deal?

To clarify, we take out a deal at £300 a month for 48 months (total cost £14,400) we pay this in a lump sum and avoid any necessity for credit checks etc.

What are the pitfalls in this proposal ( I am sure that there will some negative issues that I haven't taken into consideration)

OK, so you pay your £15k equity in both current cars into a lease. You pay £300/mo over the length of that lease.
In four years time, you had that car back. You now have no equity at all, and are £30k down in four years.

You are seriously thinking "that's it, we'll never drive again" after that?
Even if you're 79 now, you'll only be 83 in 4yrs time... Old age, of course, is far more than just a number - but there are MANY people a lot older than that still driving regularly, perfectly safely.

So what then for your transport needs? Taxis, buses, trains everywhere? If you live somewhere with good public transport, of course...

Why not keep your £30k for better things, and start feeding that public transport in now, gently?
If it works for you, go down to one of your existing cars in 6-12mo. If you really think your current cars aren't suitable any more, then replace with a used car.

Don't throw tens of thousands down the depreciation pit...

They are planning to use the £15k from the sale of their current two cars to pay £300 pm for 4 years.

They would only have spent the £15k they have now, not 30K.

Their £15k they have now won't be £15k in four years time so they aren't actually spending much at when you take into account depreciation of their two current cars, their maintenance, their insurance and VED.

If their current cars were going to be worth 7k in four years time then that minus any maintenance is all that they will have spent in reality.

The one brand new car at £300 pm will be a `better' car than a use one for £15k

I doubt you could pay all the lease payments upfront.

rubble2

Thanks for all the comments. I am not sure if I made myself clear but it as Matt_Drummer says, we will be paying 15k in total to fund the lease for 4 years. I understand that having 15k put aside in an account is no surety for the finance company as I could fritter it away on crack cocaine and wild wild women.

That is the reason that I suggested paying upfront for the whole lease cost - it seems to me to be virtually no risk to the supplying dealer/finance company. 

Isthisforreal99

rubble2 said:

That is the reason that I suggested paying upfront for the whole lease cost - it seems to me to be virtually no risk to the supplying dealer/finance company. 

Apart from making zero interest on the dealer.

Think you will have difficulty finding a finance company who operates such a thing.

matt_drummer

Isthisforreal99 said:

rubble2 said:

That is the reason that I suggested paying upfront for the whole lease cost - it seems to me to be virtually no risk to the supplying dealer/finance company. 

Apart from making zero interest on the dealer.

Think you will have difficulty finding a finance company who operates such a thing.

If the lease amount is £300 pm for 4 years the lease company gets £14,400 either way, whether it is paid in one go or in 48 monthly instalments.

The lease company would actually be better off getting it all at the outset.

The dealer would lose nothing, they would gain.

matt_drummer

It's actually a not  totally bad idea if the OP plans to stop driving in four years. Even if they didn't they could still do something in four years time.

I am in the mood for some man maths today so

Option 1 - keep the two current cars and sell them in four years

Current value £15k. Let's say £1k a year each for running costs (VED, insurance and maintenance)

That is £8k in running costs

Sell for £7k in four years.

The net position is OP will be minus 1k in four years (£8k of running costs and £7k of sale proceeds).


Option 2 - sell current cars and finance a new car for four years.

Sale proceeds minus lease costs is £0

Running costs over four years at £1k pa is 4k

Total cost is minus £4k


So only £3k to have a brand new car for four years over keep the current two cars.

With most of the risks of car ownership gone by virtue of having a new car with a warranty.



Option 3, Sell one car and keep the other and sel remaining car in four years time

Income of £7k and only £4 of running costs plus sale of one car in four years time of £3k.

Net position is plus £6k so £7k better than option 1 and £10k better than option 2


Option 4 is sell both cars now and buy a used car for £15k

Same running costs over four years of £4k and sale proceeds in four years time of £6k

Net position is plus £2k


If only one car is being considered then keeping both seems to be the worst option to take.