My Audi A3 is becoming a bit of money pit recently and its time for something new. its worth about £k trade in.

Current thinking is something like an Octavia estate on a lease deal, any pitfalls to watch out for?

I decided against Leasing and went for PCP. There was little in the monthly cost and I had a car to trade in so could use that conveniently against the new car rather than going through he unpleasant experience of selling it privately. Then at the end of the period I have some ‘equity’ in the car that will contribute to a deposit against another car, whereas with leasing you just hand the car back and start again with another juicy upfront charge to pay. BMW threw in FOC servicing over the period of the PCP term so I only pay insurance, tax and petrol.

Either way i’m sold on the concept of leasing or PCP type deals. I’m used to a certain amount going out every month on a car as I always got a ‘new’ car as soon as I paid a loan off, so I either buy a 4 or 5 year old car for that monthly cost and take the usual risks on reliability and running costs, or have a brand new car with the benefit of warranty and service deals. A no brainer really.

The greater your mileage, the less appealing they become.

Allegedly, if you’re a bit ahem economical with your mileage estimate, it will only bite you if you hand the car back at the end of the PCP agreement. Allegedly, again.
If you trade it in for another car from the same finance company, or if you buy it outright, they allegedly ignore the excess mileage… Or so I’ve been to.d by at least two main dealer salesmen. So it must be true, eh?

PCP or Lease, make sure your non refundable down payment is very low!

PCP works well if you’re actually planning to buy it at the end, or the manufacturer sets an unrealistically high GFMV to make the monthlies low. Or if you’re likely to need or want to change cars during the term.

These days GFMVs seem to be kept very low to protect the manufacturer and make some people think they’re doing well on the deal when they come back and have “equity” to put towards their next car.

Lease can work out considerably cheaper although often the good deals are on what the manufacturers want to push that month. Adding options can make a good deal rather less attractive too – you tend to pay for them in full over the (usually shorter) length of the lease.

Many thanks for the advice so far.

I think PCP might be better for us as we will only do 10k per year.

PCP deals are actually structured to encourage you to trade in and continue with another car, and from the experience of other people I know who have been through a few cycles of changing cars and jumping from one PCP deal to another, you are usually offered some pretty good deals that make it feels cheaper and cheaper. However I suspect the good deals are around their stock cars that they’re trying to shift, so if you’re not fussy about spec, then that is probably best. If you want ot start from scratch and spec your own car then I suspect the deals wont be quite as good.

The salesman I dealt with said that despite us signing up for a 4 year deal, to expect him to be calling us back after 2 years trying to entice us to jump to another car. We’ll see.

I’d also look at the same car on a purchase deal too – with my wife’s current car we bought rather than PCP’d (or leased), worked out better overall financially.

With all these kinda schemes only you can work out which is the best deal for you and your circumstances.

I have been through a few PCP schemes.

To confirm the comment above; the GFV makes a large difference in the monthly costs. I bought my current car from Audi, at the time it was 6 months old with low mileage. I used a separate finance company who offered a much higher GFV than Audi did, from memory it was about a £2k higher after 4 years. Interest rates were comparable, and it means my monthly payments are about £40 a month less. Audi did put the spin on it that the lower final value would mean I would have some equity in the car at the end. The way I see it is the finance company is taking the risk on the final value of the car not me. For example who knows how the current emission scandal is going to affect the used value of VAG cars (maybe not at all, but it could do…)

I keep meaning to change my wife’s car (currently owned) to a lease or PCP car. Most likely we will get something from one of the cheap deals that appear from time to time, rather than being too fussy about the actual car. That seems to be the best way to make leasing financially work.

bit of a sidenote – has the recent popularity of PCP / Lease had a noticeable effect on the price of 2nd hand cars at all? 🙂

Did PCP a while ago (so things may have changed) but the part-ex value of the car I had was pretty much exactly what I ‘owed’ at the end of the period, so I didn’t have any of this mythical equity to put towards the next car.

Got bitten slightly as well as my new car didn’t turn up exactly on tuime, and they wanted the old one back exactly at the end of the period so was car-less for a bit.

If you’re going to ‘overpay’ to lower the final payment cost then I’m not sure I’d consider it – I’d have to do the maths on that.

Skoda octavia and Honda Civic estates seem pretty good value to me

For me PCP is all about the manufacturers shifting new cars to feed their nearly new and used fleet stocks. They realise that the vast majority of people don’t have e £30k+ kicking about to spend on a car and loans for that value are unaffordable for most. So PCP is a good way of getting new cars out there, filling their production lines and suppliers production lines, and getting people to fund the depreciation so they can take them back and sell them on as nearly new or used cars.

Personally the more I think about it buying a car is stupid. You take all of the risk, absorb all the depreciation and front all the running costs. If you can get over that mental hurdle of never owning a car then things like leasing and PCP makes more and more sense. If you like bangernomics and don’t minds getting your hands dirty and doing the spanner work yourself, then fine, but the majority of us either can’t be bothered with that or can’t do it and want to drive around a nice new or nearly new car. If that is the case then leasing or PCP makes fare more sense.