Car buying: PCP / HP / other – all a con?

Looking at buying a new or nearly new car. Sportage/Octavia/maybe XC60 are in the mix.

Financing it, we’re considering a PCP, but interest rates are crazy owing (apparently) to PCP funds being in debt nationswide. So we’re looking at leases – but I’ve not idea what I should be looking at/for/avoiding.

Any clues/tips/hints?

I believe that if it’s likely to depreciate a lot, then they can be good value, however if it is likely to depreciate a little you’re better off buying?

We always used PCH previoulsy as it was the clearest and simplest offer as far as we were concerned.  They became unaffordable though – an XC60 for example went from £400pm (expensive at the time actually, we could have got something less premium for <£300pm)  to £650pm minimum.

We went Skoda on a PCP deal as it was an interest free offer – saved around £6-£7k over the term!  Bigger deposit needed and fat balloon payment at the end (we’ll be keeping it) but really low monthly payments for three years.  We wouldn’t have done it if faced by the same interest rates that you are.

VED is included in the PCH terms but only for the first year in a PCP, as we just found out.  With the RRP of the car just tipping over £40k, this amounts to £600 pa VED for a bloody Skoda!  It was only added options that tipped it over so they ended up being expensive heated rears seats…

EDIT: I always thought it was the opposite way round to what Kramer is suggesting i.e. low depreciating cars are cheaper to lease as the re sale value is high after the term.

Select a car from what you fancy the look of. Find it on lease deals and tally up the totals over the period….say 4 yrs. Do the same with PCP figures. Do the same with buying outright (perhaps with a nearly new one too) using a loan. See which best suits.

PCP/Lease are fine provided you accept that after the 3 or 4 yr period you either hand it back or give a chunk of cash top buy outright (or use whatever ‘cash’ is left in the car to start a new PCP deal)
Sportage GT-S 1.6. PCP £8k deposit. £468 pcm x 36 mths. (10k miles a year) total £24848..hand it back
‘Leaseloco’ £3.5k deposit. £388 pcm x 36mths. (10k miles a year) Total £17500..hand it back
2nd hand 2023 model £28k. £8k deposit. £608 pcm (sainsburys bank loan over 36 mths) Total £29900….then own the car outright with 3 yrs of Kia warranty left.

Have a look at DrivetheDeal. An online broker.  I bought my Skoda via them 6 years ago.  Good prices.  I haven’t looked elsewhere but just now they are quoting £27,625 for a new Ovtavia estate. 1.5Tsi 150bhp. You needto take out PCP. I paid mine offsoon after buying the car. Kept the free servicing etc.

“The discounted quotes shown include a £2,000 finance deposit contribution which is conditional upon you taking out PCP finance at 5.9% APR Representative over 18 to 49 months with a 0% – 30% deposit arranged by the dealer.

If you do not wish to take out this finance, then you are entitled to a £500 discount in lieu of the deposit contribution shown above. Please add £1,500 to the discounted price shown, if you are looking to pay cash.

Skoda are also offering 2 years servicing for a reduced price of £269 if you take Skoda PCP finance##

https://www.drivethedeal.com/

Too many variables to say one way is the best.

Car prices are crazy money whatever route you go these days

I guess it depends on what deal you get on the day. I’m now driving a car I always wanted but never thought I’d own purely on the back of a stupidly cheap PCP deal. Still no idea how it made sense to the finance company and I certainly don’t feel conned. I guess it depends on your idea of what constitutes a good deal, for me that was Toyota in Warrington giving me a Mustang for £308/month over 4 years when everyone else was quoting £800+/month. List price was £34k, I paid £4k up front, final payment was to be ~£20k.

Ended up buying it outright after a year once I’d figured out it was a keeper, but PCP was still a comparatively cheap route into a relatively fancy car.

or use whatever ‘cash’ is left in the car to start a new PCP deal)

Always, always, always assume there won’t be any.  All your ‘deposit’ does is lower the munflies. That’s why it’s called an initial payment and not a deposit.

I’ve done personal leases on cars for the last 15 yrs or so. It’s probably not the most sensible way forward financially, but I just look at it as a monthly payment that goes out like a bill. For that, I’ve been able to get a new car every 2-3 yrs, so never gone out of warranty, never had any mechanical issues, never had to MOT them, they’ve always been either no VED or very cheap, mostly been 2 yr service intervals, front tyres might need changing before the lease is up if unlucky. Set a budget for the monthly payment and if you’re happy with it, don’t over think it!

However…! This lease is up at the end of the year and I’m not seeing anything that’s jumping out as a particularly good deal at the moment. I’m after a full EV, but the monthly’s are too expensive as it stands.

Currently in an Octavia iV through Simpsons Skoda, they sometimes have some pretty good offers.

Keep an eye on this thread: and the mantra is ‘chase the deal not the car’. There was a deal on in stock Superbs last week (only in white I think).

https://www.pistonheads.com/gassing/topic.asp?h=0&f=255&t=1955391&i=12700

5000 pages in total – start at the end and work back.

If your finances are ok – the only thing to look at really is the total cost to ‘rent’ the car for 2/3/4 years. Factor in tyres / servicing if you are keeping over 2 years.

There have been some brilliant leases recently on the Pistonheads thread: cheaper than running an old car. But you have to be A) Flexible B) Quick.

None of it’s a con – you just choose what’s right for you.

PCP has worked well for us in the past. And I’d used it again.

If you don’t need a new car straight away I’d see what interest rates are like towards the end of the year.

I’ve got an Octavia on lease. £2500 down and £150 a month. 1.5 TSI sel estate. Just extended for a third year. Same model is £300 a month now.

‘chase the deal not the car’. There was a deal on in stock Superbs last week (only in white I think).

https://www.pistonheads.com/gassing/topic.asp?h=0&f=255&t=1955391&i=12700

that will for sure get you a good deal, but it will probably be on some run-out, high spec model that actually costs the manufacturer relatively little to produce but has an inflated list price, and the true cost is often hidden by high deposits and low milage allowance (case in point, the last superb mentioned there had a £4k deposit and you could only do 5k/year). If getting a “deal” is something you want to do, that’s a good approach, otherwise it might be better to buy the car you actually want.

Can you wait for interest rates to subside?

Because this will likely help.

During the pandemic I got a kodiaq for virtually no deposit (£300) for the monthly payment.

While interest rates are ‘high’ you are likely to find it challenging.

Agree with much the has already been said, one thing I would say in addition is be aware some lease companies (I am looking at you VW finance) can be aggressive in their approach to the final wear and tear inspection (probably applies more to PCH than PCP).

I had a bad experience on my first lease where they tried to charge me hundreds of £s for barely visible marks or scratches which in hindsight could have easily been T cut out. I did manage to get the figure down eventually as I refused to sign off on it, took my own photos and refuted their invoice by email a number of times. I’ve had better experiences since then as I now go over the car with a fine tooth comb before handing back, and would get any marks or scratches done by a local mobile dent and scratch repair firm.

The above being said I think you can still occasionally get some ok deals if what you want is a new car every few years.

Agree with what’s been said, pick something you want and find the best deal regardless of how it’s paid for.

Had loads of PCP’s and now on my second hire via the work scheme.

Hire is good as it is zero deposit, includes service/mot/insurance (on my scheme) but they are certainly keen to pick up faults at pick up time and it was hard work getting our old and new cars to exchange at a similar time due to the provider not being the same.

PCP is great if you get a good price and intend to replace the car at the end of the term. Going for cars that depreciate slowly will reduce your monthly cost so you could end up in a premium brand for the price of the level below. With both Ford and Land Rover the guaranteed future value was set just below PX value meaning if you looked after the car and stuck to the milage you should have some money to be put against the deposit on the replacement, if that makes sense? BMW set their GFV so there’s no deposit left but it makes the monthly payments slightly less. That was the case when I used each anyway. On a PCP they tend to be less bothered about wear and tear too, especially if you are replacing the car with another.

Am I missing anything with this? Seems daft cheap

https://www.autotrader.co.uk/car-details/202405230017723?advertising-location=at_cars&atmobcid=soc5&fromSavedAds=true&sort=relevance

Well I think it’s all a con. I just buy cars with a bank loan and keep them a long time. Just sold a Volvo C30 for £1k that I bought for £10k 11 years ago on a 3 year term bank loan. Can’t remember what the repayments were but £9k divided by 122 months of motoring = not very much. Likewise, bought a V90 about three years ago, won’t be long until the loan pays off, then we’ll start gaining real ground on the cost of the desire to have a new motor every few years.

Probably helps that I maintain myself, but I’ve never had a car where averaged maintenance monthly costs in old age got anywhere close to PCP / HP payments.

Just sold a Volvo C30 for £1k that I bought for £10k 11 years ago on a 3 year term bank loan.

Good job there are people who buy new, so you can buy nice second hand cars then!

And it’s the RNP argument – look at my awesome £500 buy – which I could only do because I have the time and skills to strip it to bits and rebuild it. The vast majority of people struggle with checking the oil! 🙂

@Pook

That does look good value. Big estates just aren’t fashionable anymore. I bet a comparable Volvo SUV would be a lot more.

You won’t be missing anything with Motorpoint, they tend to do exactly what they say they will. They will not haggle though.

Am I missing anything with this? Seems daft cheap

This

Big estates just aren’t fashionable anymore.

Volvo have stopped selling the V60 and V90 estates in the UK due to lack of sales. I really tried to buy one last year but they were £28-29k for a 3 year car old car and bit clunky. That ’22 plate has a nicer gearbox than the ones I was looking at.

infotainment system is a bit rubbish though, but I’d buy one at that price.

https://www.carmagazine.co.uk/car-news/industry-news/volvo/estates-return/

“And it’s the RNP argument – look at my awesome £500 buy – which I could only do because I have the time and skills to strip it to bits and rebuild it. The vast majority of people struggle with checking the oil!”

I just think cars are mental prices nowadays and I prioritised paying the mortgage off early by maintaining our cars and running them as long as possible including buying £500 ‘bangers’ and adding value to them.

@Pook
My dad used to work for Motorpoint at Burnley. Nothing to worry about, all above board, good place to buy a car from. He’s recently bought another car from there even though he’s retired.

Both my cars are now fully paid for having been bought for £12 and £14k each second hand I think. As a result now have a golf GTi and a Skoda octy vrs (diesel). But the real reason for mentioning was at the end of the second loan period all of a sudden I was £400 a month better off aside from servicing costs of course! Felt/feels good though still. Both cars at close to 95k each and I’m sure they’ll last a good while longer.

We’ve got skoda pcp on an octavia.  Really good on the service and warranty deals, but more importantly Mrs Pook is happy

Volvo have stopped selling the V60 and V90 estates in the UK due to lack of sales

They’re available again.

I feel that PCP/HP only make sense as part of a salary sacrifice deal or if you’re buying a specialist vehicle with very low depreciation (eg: a used supercar over £100k).  The interest rates are high and I’ve had many friends bitten by the damage charges at the end, and the mileage allowance is poor!

Personally, as I don’t have access to a salary sacrifice deal, I use a personal loan (at half to a third of the cost of a PCP/HP deal), and buy a good condition used car.  I find the trick is to always allow for 10% of the car value as a contingency to cover any unexpected repairs to bring it up to standard. A big advantage is the personal loan doesn’t require any deposit.

At the end of my ownership (typically 8 years/80k miles) I can sell it for half what I paid for it.  Last time I did that, it cost me £200 a month in depreciation/interest and servicing costs to run a BMW 335D.  What car does £200 a month get you on a PCP/HP deal?

Currently I’m doing the same for a BMW 340i, which even with the skyrocket used car prices, should still work out the same  at £200 a month.

Our last 2 cars have been leases. Both been good experiences.

First was direct with a Volvo dealer, Volvo v40 for 4 years with no option to buy after.

The second was direct with a VW dealer, an egolf for 4 years. We opted to buy this after the lease.

If you’re looking at leasing check the mileage allowance as if the price seems good then the mileage is usually 5k per year.

Also new cars seem to be 0% Apr and used are around 9% Apr.

Personally, as I don’t have access to a salary sacrifice deal, I use a personal loan (at half to a third of the cost of a PCP/HP deal), and buy a good condition used car.

I do the same, but just go with the best ‘price’ to repay – last time it was PCP, the previous was HP and the one before that was a Loan.

Current car has currently barely depreciated as I got ‘lucky’ on timing – both for purchase (1/2 new price at 6 months old), percentage (1%) and recent skyrocketing inflation, especially in car prices.

Well I think it’s all a con. I just buy cars with a bank loan and keep them a long time. Just sold a Volvo C30 for £1k that I bought for £10k 11 years ago on a 3 year term bank loan.

you paid interest via the bank on the full price. not so bad in this case, as you got 9k or 90% of your loan cost as the value you extracted from the car.

try buying a new car and selling after 3-4 years using this method. buy at 30k, sell at 15k. youd pay interest on the 30k (would a bank even load you that much?) but only extract 15k or 50% of the value of the car.