Does it make economic sense to buy a new car (on PCP) or buy a 4 year old car?

Time to change the car. I was planning to do what I usually do of buying a 4 year old car and running it for 3 years. However, several people have said I should buy a new car on PCP. Apparently it makes sense. They say I won’t have to worry about repairs because a new car has a full warranty, no MOTs and I’ll have the latest most efficient/powerful engine.

First up I don’t “need” a new car. I’d always dismissed new cars because of depreciation and finance because it was just a way of buying something I couldn’t afford. But if it makes economic sense then why not. Repairs and MoT’s don’t worry me. And the warranty only works if the dealer agrees it’s a warranty issue. We only do 8k miles a year so fuel is not an issue.

My Civic cost £7,500 which after 3 years will have cost me approx. £4,500 including depreciation and servicing etc. A new HR-V would cost me £11,893 over 3 years on PCP, plus whatever servicing costs are. Let’s say £12,300 all in including a new set of tyres. I couldn’t find PCP numbers for a new Civic but I guess it works out the same as they cost about the same new.

By my maths £4,500 is considerably less than £12,300, so there is no economic reason to buy a new car.
Am I missing something??

Am I missing something??

Nope.

Pcp is attractive to some people as they can get a shiny new car without a huge deposit or large monthly payments.
Dealers love Pcp as nobody ever buys the car after three years, so they get to sell them another new car.

If the “shiny new car” bit isn’t important to you then save your money.

I think just about any new (civic sized) new car will cost more than £4500 over 3 years.

My observation is that “premium” brands tend to have cheaper PCP deals because they lose less value over the first three years. Last time I looked a BMW 3 series cost around the same as an octavia to lease.

If you change every three years, you don’t see your circumstances changing (mileage, income) and can afford it, then leasing can make sense if you would like a new car.

Otherwise I think your approach is probably the most economically sensible. I think that most(all?) 3 year old cars will run quite happily for another 4-6 years without major failures or maintenance expense.

I’ve just sold an octavia after taking it from 50K to 150K over 4 years and have had no major failures. Although having spent a week in my new octavia the suspension is a lot plusher than the one I got rid of.

Even if i had some major repair bills I’d still never get near £12k.
The new car isn’t important to me. And while are jobs appear stable, I think it’s far to say there could be turbulence down the line so I’d rather not have the risk.

PCP type deals are good for, and designed for, people who want brand new cars and change them regularly. If you are not bothered about a brand new car or want to keep a car for a long time then PCP doesn’t really make sense, the economics of buying a used car and keeping it long term will work out cheaper.

For me PCP works in my mind because i’ve always bought used cars, five or so years old and pay a loan and once i’ve paid the loan off I change the car. So i’m used to constantly paying two hundred and fifty to a few hundred quid a month on a car. So if I can get a new car on PCP for around that much per month then why not? Why drive a 4 or 5 year old car around when I can be driving a brand new car around for the same or similar monthly outlay.

The wife is nearly 2 years into her first PCP deal and so far so good. First service is coming up in the next couple of months and it’s covered. Not had to worry about MOT’s. We’ve just taxed, insured it, fuelled it up and driven it. The salesman who bought it off us said he’d be calling us after 2 years to coax us off our current deal early and onto a new deal so, we’re waiting with anticipation to see what deal he might offer us. Well only know for sure if PCP works for us when we see what deals are available to us for the next car – how easy it is to upgrade or is it something that will keep costing us more and more each time.

I’ve recently done the maths on this. For the cars I was looking at (pretty normal hatchbacks) buying a few years old was cheaper than leasing and leasing was cheaper than buying ‘nearly new’, partly because that would have involved a loan. I factored in £700/year on maintenance of a used car and a pessimistic second/third-hand sale value in three years and there was still a decent gap between that and a brand new lease.

FWIW, my GF has done PCP for her car and says she wishes she’d either done PCH or just got a loan and bought the car outright. Her parents have done PCH for years and say they’d never go back to buying a car.

We do something similar to the OP, Buy 2-3 year old car for £7-10K, Keep for 3-4 years. It’s worked for us. The running costs are the normal £200-£300 service a year, plus a few tyres. I keep looking at PCP costs but, like the OP, can’t make it work for me.
Edit, we’re lucky to be able to have the cash, so no loans.

so there is no economic reason to buy a new car.

No, there isn’t. You have to really want a new car.

have you looked into leasing Op? there are some great deals available, especially if you don’t mind a smaller engined car. talking less than £100 a month.

I’ve been a sceptic of PCP.
Until collecting our Seat tonight – and garage has Ibiza 1.2tsi for £139 down and same a month for three years, 10k annual mileage.
I could sell current car, clear loan and have £2k, and reduce cost monthly by £30ish on a new car that has no repair worries….but I would be paying for three full years whearas current car is paid off in 18 month…

Not looked at leasing yet – although that sort of makes sense. Any car will always end up as rust in the end! Leasing seems to work out cheaper than PCP, but buying used still seems to win.

I could sell current car, clear loan and have £2k, and reduce cost monthly by £30ish on a new car that has no repair worries….but I would be paying for three full years whearas current car is paid off in 18 month…

Yeah but after the loan’s paid off the car is yours forever. If you lease you have no asset, you are *always* paying.

Auto loans are the next bubble to burst. Not sure what that means for the debtor rather than the creditor but anyone who thinks this tidal wave of free money being thrown at us comes at no longer term cost is an idiot who’s clearly not paying attention, and hasn’t been since 2008…
Buying a depreciating asset on debt always used to be known as something only very stupid people did but now we appear to be doing it en masse – something like 80% of cars in UK sold on finance now

We leased a focus for 2 years, it released some cash when we were short and was a cheapest to have a brand new car for a couple of years. Replaced it with a 4 year old 3 series, nicer all round, costs a bit more per month, but it’s ours, and when it’s paid for it’ll be a deposit on a 4 series 😀

Yeah but after the loan’s paid off the car is yours forever[b]a depreciating asset that consumes more resources to fix as it wears out [/b]. If you lease you have no asset, you are *always* paying.

Ftfy

😉

Leasing works if you get a good deal. For example

http://www.hotukdeals.com/deals/seat-ibiza-sport-coupe-lease-135-54-pm-24-months-8000miles-pa-total-3722-04-nationwide-2597047

Similar (ish) size car to the civic, £3700 for 2 years. 3 year deals are normally cheaper per month, but I can’t be bothered to hunt one down. If you’re not picky about the exact car, they can be very cheap motoring

depreciating asset that consumes more resources to fix as it wears out .

It’ll never cost as much as replacing it with a new car!

And whilst it may be a depreciating asset if you want to call it that (I don’t) – a leased car is not an asset at all, but still a cost.

Auto loans are the next bubble to burst. Not sure what that means for the debtor rather than the creditor but anyone who thinks this tidal wave of free money being thrown at us comes at no longer term cost is an idiot who’s clearly not paying attention, and hasn’t been since 2008…
Buying a depreciating asset on debt always used to be known as something only very stupid people did but now we appear to be doing it en masse – something like 80% of cars in UK sold on finance now

5 years @ 0% …… why spend your own money?