Hi guys,

I’ve always bought my new cars and vans outright. But with the shift in many industries away from ownership to services and access, is lease and PCP a better form of having a vehicle to drive?

What are the pros and cons? And are there other options i should consider?

My big van is 10 years old, and not worth very much, so it feels like long term ownership doesn’t have many pros in the form of investment.

I’d be looking at a new vehicle for commuting and dog walking activities.

Cheers

Ricks

There’s been a few threads on this recently. Search for “pcp” on the forum and go back a couple of months. Here’s a couple:

http://singletrackworld.com/forum/topic/buying-a-car-on-a-pcp-whats-the-bobby
http://singletrackworld.com/forum/topic/nice-car-on-personal-leasewhy-does-it-feel-uncomfortable

Cars are simple:

They start at X price and, after the period they’ve been in your hands, they are worth X minus depreciation.

So, since you’re funding depreciation, find the cheapest way to do it. The only two variables you need to apply are: (1) how to minimise the depreciation (by lowering X at the start and (2) whether turning capital (cash in the bank) into a car is better than keeping it in the bank and funding the depreciation from income.

Any of those options let you achieve this. Choose the cheapest. Go!

This always turns into a bun fight between very in trenched sides who won’t listen to anyone else or accept that any viewpoint other than their own could possibly have any merit as there is only one right answer – theirs.

The truth is, anything as large, complex and taxed as a vehicle will ALWAYS cost money.

Another truth is nicer vehicles, are nicer.

Newer vehicles are usually nicer – partly because we still strive as a human race to build the next thing a little bit better than the last thing, and partly because it’s nice to know that your farts, and your farts alone have besmirched the drivers seats.

It’s also true most people are working with a finite budget and older, better quality vehicle are the same price as new lower quality ones.

PCP offers a ‘smart’ solution. You pay a deposit (not that big these days) and rent the vehicle – you basically pay for the depreciation between when you bought it and when you give it back plus interest. That’s it. It’s never “yours” but that’s a two sided coin, it breaks, it’s someone else’s problem, that’s why PCP deals are restricted to newer cars with warranties. (usually)

Cash is always a lovely thing, you can take your cash (which you borrow or work hard to accumulate) and you go off and buy a vehicle. You can spend a lot or a little – what does it cost you, really. Well You buy for X and at some point in the future you sell for Y, be that in 2 years time or 15 years time when you give it to the scrappy. The Difference between X & Y is the true cost of the vehicle, the depreciation, so the same at PCP really. Half the people in the world will disagree with me because blah blah blah, but that’s the true cost.

You CAN buy a vehicle for a lot less, ‘Bangernomics’ or maybe you like something a bit nicer so you spend £5k £10k whatever on your chosen type of vehicle – everyone’s got a sweet spot to where they think the best value is. Okay you buy a Focus for £5k, you keep it 2 years and sell it for £2600 – it’s cost you £2400 over 2 years – £100 a month, can you lease a new Focus for that? No, but it’s had 2 MOTs since then, maybe you’re lucky, maybe you’re not.

If you think that £100 a month for a £5000 Focus for 2 years is better value than a new one for say £200 a month then, PCP isn’t for you. If you think a new car for £100 a month more than a 5 year old one is – then PCP is for you, it all boils down to how much you value ‘having a car’. Some people see them as just a tool to get to work because it’s too far to ride and you can’t take the train, some people see them as an extension of them, a status symbol, some people see them as something to enjoy, DAB radio instead of just FM, nice plush seats without the odd stain and worn bolster on them. Everything nice and new.

I don’t think there’s a right or wrong answer – I personally think those who get all ‘high and mighty’ about other people leasing cars “they can’t afford” should look at themselves. How many times do I hear people say “oh it’s only leased ha ha ha” when they’re talking about their neighbours new Car, how the hell do they know? British people won’t willingly tell you how much they spend a month on coffee, they certainly don’t go blabbing about how and why they buy their cars.

P-Jay, that’s a great reply.

For those who TL;DR… “Okay you buy a Focus for £5k, you keep it 2 years and sell it for £2600 – it’s cost you £2400 over 2 years – £100 a month, can you lease a new Focus for that? No, but it’s had 2 MOTs since then, maybe you’re lucky, maybe you’re not.

If you think that £100 a month for a £5000 Focus for 2 years is better value than a new one for say £200 a month then, PCP isn’t for you. If you think a new car for £100 a month more than a 5 year old one is – then PCP is for you”

I’m off to get the calculator out and do some sums.

P-jay great reply

As you seem to get this, does this make sense?

I recon that the car industry has decided that what works for them is private buyers not buying out right. I would say I was doubter, how can they lease it to you for the less than the depreciation costs. Well I think the answer is that as they set retail prices they’ve set the market so that it is cheaper to lease

Great reply from PJ.

But just to be that guy, it’s entrenched.

Sorry to be a damp squid.

Let the sanctimonious begin

Not answering the question but PCP works for the car dealers as well because…..

1/ people who like new cars on PCP in general like to stay in new cars, hence after 3 years the large majority chop it in and start again

2/ It gets them a steady turnover of 3 y.o cars to sell as guaranteed used

3/ PCP’s are finance vehicles, sometimes at 0% but most often they’ll be at rates well in excess of the cost of the money to them, so it’s making money on the finance

(4/ it’s also a means to get people out in new models so that they are seen and get people seeing them. My mate has had 2 recently at cracking rates purely to get some out on the road – one was a Cactus, can’t recall the other)

Can’t add to P-Jay’s post for the pro’s and con’s analysis, but from a personal PoV I couldn’t really care less so I drive a 7 year old S-Max that I own outright, but my wife likes having a new little car every 3 years now we can afford it so we’re now on our third go around with Fiat 500’s.

Certainly from my recent looking around the biggest differences between lease and PCP are:

Leases you tend to put less money down and pay similar a month as a PCP.

A lease you don’t have the flexibility to sell the car and have no outgoings if your life gets turned upside down like you would a PCP deal.

I had PCP on a BMW, hated the car so sold it, settled the finance and had an Audi on PCP instead, I wouldnt have had that flexibility with a lease.

@alptill

Yeah possibly, Ford are the kings of it, their ‘Ford Options’ deals always used to be amazing value (on the face of it) but then they’re American and the US market is based around leasing.

Peugeot certainly went that way in the 2000s hook buyers young with free insurance deals and cheap PCP deals.

The downside for a lease dominated market is that instead of making a product that will last decades, they go for years.

@jamie, that’s cool, I’ve always been better with numbers than words 😉

PCP offers a ‘smart’ solution. You pay a deposit (not that big these days) and rent the vehicle – you basically pay for the depreciation between when you bought it and when you give it back plus interest. That’s it. It’s never “yours”

That’s not quite right. The whole point of PCP (and why it costs more than plain rental) is because at the end you have the option to make a ‘balloon payment’ of several grand and buy it outright (or give it back and get another).

😆

It’s a good question and one I always ask myself. My “issue” is that I don’t like cars particularly (apart from wanting something reliable and cheap to run) and I do high (ish) mileage of 25-30k per annum. Most deals seem to be focused on average or lower mileage. I understand why it’s more for high mileage as I am devaluing a vehicle much more quickly but it is tough.

Have done various things over the years, cash for old 2nd hand, cash for newer 2nd hand and last few purchases have been PCPs, some brand new, some ex-demo, some 2-3 year olds.

We’re going to give leasing a go for a couple of years (after reading DrP’s thread linked by Cougar ^). Went onto WhatCar leasing and saw that a model we liked was on a special offer as it’s on an end-of-life cycle. Went to local dealer, got him to match the dealers on WhatCar site, and then throw in a model upgrade and a few other bits. I’m looking forward to a nice new car with lots of toys for a few years. Accountant will make it a bit more tax efficient by running through Mrs DD’s Ltd. company.

All in all it’s cheaper over the term than any of the PCPs we’ve had (YMMV).

Came home after placing order in self-congratulatory mood. Unfortunately lots of others spotted the same deal, and my anticipation for a new car end March/April has been replaced by an impatient wait till the end of May. 😆

I’ve looked only today at a kia optimo sport wagon. It looks a very nice motor. But it’s a kia. Will my neighbours laugh at me? I don’t really care. It’s 1300 up front then 160 a month for 2 years on 10k pa. Is that a good deal? Seems it to me.

If you are not to fixes on a particular model some of the lease deals are are amazing compared to PCP.
Of course nothing compares to buying 4 years old and keeping until it dies if you are lucky but that’s just apples and pears.
I’ve done both and now go for the lease deal route, not because I want a new car but because I want guaranteed lowish costs.

got him to match the dealers on WhatCar site

This is very good: https://www.contracthireandleasing.com/

I’ve looked only today at a kia optimo sport wagon. It looks a very nice motor. But it’s a kia. Will my neighbours laugh at me?

Lot of car for your money. My petrolhead mate swears by them. Depreciate vertically, mind.

Just checked that Cougar, some good deals there but nothing to touch ours – like I said, it was a special from the manufacturer that finished end of January. I’m always suspicious of these kind of “sales” but on Feb 1st, even the entry level model was more expensive.

(Btw, the WhatCar site just advertises lease offers from main dealers, it’s not a leasing business in itself.)

I’m always suspicious of these kind of “sales”

Perhaps it’s ‘last year’s colours’ – I expect you get some crazy deals right before a facelift model is due?

Perhaps it’s ‘last year’s colours’ – I expect you get some crazy deals right before a facelift model is due?

Indeed. It’s in the last year of its current model cycle or whatever car types call that. So lots of toys etc…slightly older tech than the brand new one coming but all new to me. 😀

Sounds like a Volvo xc60 ….