PCP vs Lease - Dingle232

Apologies if this has been debated before but I am currently considering taking the out the equity (depreciating, naturally) I have in my car and either going with a personal lease or PCP.

I have always owned my cars before so this is very much new territory for me and I am not sure which is the better option financially and practically. The initial rental for a lease would be around £3500 followed by payments of around 400/month for 4 years. A PCP is slightly less but the initial payment would be higher given the car I am after (Audi Q5).

Any advice folks?

PCP vs Lease - thunderbird

My advice is simple.

Get a piece of paper and work out the costs over 4 years for a lease, PCP and even getting a loan from another provider.

Normally the best route is the cheapest unless due to previous credit history you are limited in your options.

Try working it out, can be fun. And don't forget that by taking a PCP some brands give you a huge contribution. Pay this off within 14 days and there is no fees to pay, only the interest for the days you have has the product. Get a cheap loan from elsewhere and you are better off. Better still pay off the PCP with your own cash and take the PCP contribution as an extra discount.

PCP vs Lease - Dingle232

Thanks. I am definitely doing the maths though paying off with my own funds isn't going to be possible and I guess that's the reason do PCP's/leases in the first place right - so you pay a lower amount to be a newer car more regularly on the understanding that you'll never own it?

I have always bought cars outright and my logic is that whichever way you do it then you lose out. It's just a case of minimising that loss.

PCP vs Lease - daveyjp
£400 a month for 4 years is a long time to pay for a vehicle. When it’s shiny and new it looks a good idea.

After 3 years when the potentially larger maintenance and repair bills start coming in for tyres, brakes etc it may start to seem unwise, unless you have already taken a decision to buy the car at the end of the lease/PCP.

Edited by daveyjp on 25/02/2020 at 10:40

PCP vs Lease - SLO76
The thought of shelling out £22,700 over 4yrs on a car and then having absolutely nothing to show for it at the other end horrifies me. Unless someone else is paying for it or it’s tax deductible then I wouldn’t even think about it. After a few months you’ll surely regret it and it’ll just become another car. Great for the first short spell but just a car once it has a few miles and a bit of dirt on it.

A loan for say £22,000 over 60mths at 3% APR costs £393.96 with a total cost of £23,637.60. Add your £3,500 deposit and this gives you a very healthy budget of £25,500 to go shopping for a good used large or smaller new SUV that will still be worth a substantial amount of money in 4yrs instead of absolutely nowt.

The Q5 is to me obscenely overpriced, even used they seem to be daft money for something that’s really not that impressive to me. You could however get a brilliant nearly new A4 with plenty of spec that’ll be much nicer to drive for £25k and in 4yrs you’ll still see a five figure sum in value. A used Q5 is an option but it’ll be a couple of years old with circa 30k on the clock but again it makes far more sense than f***ing all that money away on leasing one in my opinion. Put a private plate on and no one knows what age it is. A new VW Tiguan is another worthy option and to me a nicer more honest car than the Audi.

I just found a great car on Auto Trader:

www.autotrader.co.uk/classified/advert/20191128483...3

I just found a great car on Auto Trader:

www.autotrader.co.uk/classified/advert/20200207706...9

Edited by SLO76 on 25/02/2020 at 11:06

PCP vs Lease - Dingle232

With a PCP I am not sure where you are getting your maths from as the cost is £400 x 36 = £14400 (Audi put the deposit in) which equates to £4800/year cost to me ignoring tax and servicing etc.

I have owned my car for 1 year (bought it a year old) and it's now worth £4800 less than when I bought it. That depreciation may slow down over the ensuing 2 years of potential ownership but the 'losses' as opposed to the 'expenses' over the period of ownership are broadly the same.So in reality you are either losing or paying broadly the same amount but I'd be driving a new car every 3 years - something I could not otherwise afford to do.

Undoubtedly could get an A4 or similar for less but I need an SUV. They seem to always be more expensive.

PCP vs Lease - SLO76
“ The initial rental for a lease would be around £3500 followed by payments of around 400/month for 4 years.”


£3,500 + 48x£400 = £22,700 = an insane amount of money to rent a fairly ordinary car for 4yrs in my opinion.

PCP vs Lease - SLO76
“ With a PCP I am not sure where you are getting your maths from as the cost is £400 x 36 = £14400 (Audi put the deposit in) which equates to £4800/year cost to me ignoring tax and servicing etc.”

A very different set of figure from the lease you quoted above. If there’s no deposit (Audi fund it all) and this is the only cost then this does make much more sense financially. I am assuming this is on a new car? I still couldn’t accept a loss like that over 3yrs and would far rather buy a cheaper used car for maybe a maximum of £18k and take the much lower depreciation but if it has to be a Q5 then the PCP you mention here is probably as cheap as it gets. Often manufacturer subsidised PCP’s are the cheapest way to fund expensive new models like this as list prices are utter nonsense. This is a fairly modest sized SUV with little more space than a Golf inside yet they list at £40k plus with a bit of spec which is just plain daft.
PCP vs Lease - RichardW

Looking at the Audi website, although there is an Audi contribution of £4500, a customer deposit of £6750 is required with monthly payment of £415. This makes the cost over 4 years (10k allowance) over £26.5k - and the interest rate is 6.5% APR....

PCP vs Lease - thunderbird

With a PCP I am not sure where you are getting your maths from as the cost is £400 x 36 = £14400 (Audi put the deposit in) which equates to £4800/year cost to me ignoring tax and servicing etc.

You clearly wrote above "The initial rental for a lease would be around £3500 followed by payments of around 400/month for 4 years".

So is it 48 payments or 36.

PCP vs Lease - John F
The thought of shelling out £22,700 over 4yrs on a car and then having absolutely nothing to show for it at the other end horrifies me.

My thoughts exactly. I too like big fast comfortable cars but I like value for money as well. It's always cheaper to buy them at least four years old with saved up cash. E.g. in 2003 I bought an Audi A6 2.8 for £8000, and in 2014 sold it for £800 and bought an Audi A8 for £12,000. Seventeen years, <£20,000, no major repairs. The A8 (12 cylinder sport quattro) is still mine, is still great to drive and is still worth a few thousand. So that's less than £1000 a year, or £90 a month unless it goes bang tomorrow - but even if it does I think I will still have had my moneys worth. PCP = Lease = No-no!

PCP vs Lease - Senexdriver

I too looked into leasing and PCP back in the summer when I was considering trading in my A4 Avant. I bought the A4 outright and after 3 years the likely trade-in value meant that I would have been no worse off by leasing it from new, so I seriously considered leasing the replacement.

The disadvantages of leasing for me were first that if for whatever reason you can’t continue to run the car (a possibility with me due to deteriorating eyesight) you are obliged nevertheless to pay the remaining lease instalments. Second, when the lease term is up, you are obliged to hand the car back, so what happens if at that stage you haven’t seen anything you fancy as a replacement or - worse still - there aren’t any attractive leasing deals available. It seemed to me that I might have to settle for a car I was only half-hearted about simply because I need a new car. Owning outright does at least give you control over when you decide to trade in.

Back in the summer when I was weighing it all up, Volvo were offering some very good PCP deals at 2.9% APR which when combined with a generous dealer contribution meant I could get a V60 for a little over £200 per month over 3 years with a reasonable deposit. I can’t remember the exact figures because I didn’t proceed, but only because I couldn’t find a dealer who had a demonstrator with the particular engine I wanted.

I’m probably going to look into it again this summer when my car approaches 4 years old and still has some value and at least I shall be better informed about leasing and PCP this time.

PCP vs Lease - JoeB

Seems totally and utterly bonkers to me. Lock yourself into making large regular payments adding up to £20k+ and have nothing to show for it! a lot can happen in four years - ill health, family problems, lose job or even change job which requires a lot more driving and pushes you over the driving limit. You can't just give it back and walk away. You will have to service and repair it at the dealer and then they will expect it back in pristine condition.

Cars lose most of their value in the first couple of years. I would try to get a low interest loan and buy a 3 year old Toyota or Honda SUV instead of some overpriced flash German status symbol which fools no one (everyone knows that 90+ of them are on PCP or lease). Get your Toyota or Honda regularly serviced and it will easily last another 4 years. My Camry will be 21 years old later this year. 300k miles on original engine and gearbox.

PCP vs Lease - concrete

As we all know we make the deal that suit our circumstances. Do the sums correctly and the figures will tell you everything. I recently leased my Volvo XC60. In total over the 3 years I paid in rental near enough 10K ( I got an exceptional deal). The historic depreciation on that vehicle was way in excess of that so buying didn't make sense at all. PCP do offer a guaranteed future value which you can use to determine the efficacy of the deal and manufacturers do move a lot of metal that way with incentives for buyers and dealers. Again the maths have to add up. We also all know the best way of all is to buy fairly new used and pay cash. Look after it and either trade it on later or keep it for a good long time so depreciation is not much of a factor. As ever your particular financial situation will determine your choices. Good luck.

Cheers Concrete

PCP vs Lease - Dingle232

As we all know we make the deal that suit our circumstances. Do the sums correctly and the figures will tell you everything. I recently leased my Volvo XC60. In total over the 3 years I paid in rental near enough 10K ( I got an exceptional deal). The historic depreciation on that vehicle was way in excess of that so buying didn't make sense at all. PCP do offer a guaranteed future value which you can use to determine the efficacy of the deal and manufacturers do move a lot of metal that way with incentives for buyers and dealers. Again the maths have to add up. We also all know the best way of all is to buy fairly new used and pay cash. Look after it and either trade it on later or keep it for a good long time so depreciation is not much of a factor. As ever your particular financial situation will determine your choices. Good luck.

Cheers Concrete

Thanks - a far more balanced argument. Makes sense.
PCP vs Lease - thunderbird

As ever your particular financial situation will determine your choices

Exactly what I said in post 2 but I think the word "will" above would be better replaced by "should". Common sense should prevail but as we all know those 2 words are rarely used together.

Edited by thunderbird on 25/02/2020 at 16:18

PCP vs Lease - concrete

As ever your particular financial situation will determine your choices

Exactly what I said in post 2 but I think the word "will" above would be better replaced by "should". Common sense should prevail but as we all know those 2 words are rarely used together.

Its all semantics Tbird. However the choices are determined you must exercise, as you rightly state, common sense. With your head and not your heart. No sentiment in finance.

Cheers Concrete

PCP vs Lease - SLO76
I got an excellent deal on a new Honda CRV in 2014, upfront rental was £1300 and monthly payments were £259 over 4yrs with a mileage allowance of 10k p/a. In total £13,732 which was approximately the likely depreciation had I bought it even with a decent discount. Today the equivalent car is substantially dearer.

I still wouldn’t have another on lease or PCP as it was too limiting. I ended up running a third cheap car to keep the miles off it to avoid a penalty at the end. I did this at zero cost thanks to a wee bit of Bangernomics skill but had I not I would’ve had a substantial fee to pay at the end. I like the freedom of owning.
PCP vs Lease - John F

Do the sums correctly and the figures will tell you everything. I recently leased my Volvo XC60. In total over the 3 years I paid in rental near enough 10K ( I got an exceptional deal). The historic depreciation on that vehicle was way in excess of that so buying didn't make sense at all.

Thanks - a far more balanced argument. Makes sense.

It only makes sense if you must have a new car every three years. For the average punter doing average miles (8000 a year) or less, £3,300 per annum 'depreciation' (or over 40p per mile) makes no financial sense at all.

PCP vs Lease - barney100

Can't see the point of leasing, £400 a month? what restriction s on mileage? Dosen't appeal at all.

PCP vs Lease - Chris M

My understanding is the car is never yours with a PCP.

Does this mean you are immune to this Car Owner virus I keep hearing about?

PCP vs Lease - fray bentos

Last month a major motoring magazine more or less confirmed what we all should know.The cheapest cost for a 'new' car is to buy a zero milage pre reg and source your own finance or pay cash if you have it. The first two examples of deals were between 25 and 33% discount. Whatever car you want, someone, somewhere, sometime, will have one for sale. No brainer in my humble opinion.

PCP vs Lease - Terry W

If you have the money you are at liberty to do whatever you want. You need no justification for buying a large fast car if that is what gives you pleasure. As a rational piece of behaviour it leaves a lot to be desired.

The growth in PCP and lease deals is to help dealers sell more cars to people who can't afford to buy outright. They are in the business of making money, not doing you favours.

Using a monthly cost somehow convinces the punter that it really isn't very expensive - £400 a month, no problem. Nothing to show for it after 3 years - but I can just start another contract with a new car.

But if you want a deal - buy a pre-reg for 25-30% discount or a one year old at 50%. Keep it for as long as it meets your needs - say 6 years. Cost each year for an entirely adequate 4/5 seat hatch at a list of £24k will be around £2k pa not £5k on a lease.

£3k a year after tax is not trivial to most - over 6 years of Ford Focus (or similar) ownership it will pay for a new kitchen, bathroom (or two), or a small extension. Or with tax relief (this may not last) you could increase your pension pot by about £25k

PCP vs Lease - S40 Man

Using a monthly cost somehow convinces the punter that it really isn't very expensive - £400 a month, no problem. Nothing to show for it after 3 years - but I can just start another contract with a new car.

You could make similar arguments about renting property. Lots of young and even middle aged people can't afford to buy a house and have to rent. Pay a mortgage for 2t years and the house is yours. Renting as with car lease you end with nothing.

A car is easier to buy outright as the costs are (generally) less.

People pay rent, mobile phones car insurance monthly so why not car lease? Even if it fits as everyone has pointed out cost you more in the long run.

PCP vs Lease - thunderbird

But if you want a deal - buy a pre-reg for 25-30% discount or a one year old at 50%.

That certainly works for some cars but not all. When we bought the Pulsar it was brand new (not pre-reg) and discounted after negotiation from £19000 to £12000, that is 37%. The Focus that we had before that was brand new (not pre-reg) and was discounted form £17000 to £12000, a measly 30%.

But the cars we are looking at now are simply not available in such huge volumes to make huge discounts realistic. A quick look on the internet shows no pre-reg examples. Year old ones tend to be ex dealer stock loaded with up to £10,000 worth of extras and these are more expensive than a new basic one.

But the good news is after 3 years it is likely to retain a larger amount of its value than cars that were heavily discounted from new (provided you don't go mad with the options).

Big discounts are great but so is buying a car that you really like and actually want.

PCP vs Lease - Manatee

I've wasted a lot of money on cars but I reckon not using drip has saved me a load more.

Dealers love PCP for 2 reasons. It ties people into changing every 3 or 4 years (which is costly) and it's far easier to upsell, either to a higher grade or a bigger/'better' car.

When you have to write a cheque for an extra £3,000 to get bigger wheels, a built in sat nav and a parking camera it concentrates the mind on the real difference in cost.

PCP vs Lease - thunderbird

People today do not realise just how lucky they are compared to what we had in the early 70's. When I bought my first "decent" car I borrowed £500 from the bank with dad as a guarantor. The interest rate was about 14%. If I had used dealer finance I would have been paying nearer 30%

Yet people on here think they are being robbed when a PCP has a rate of 6% (that is the highest I have seen advertised) and many are lower.

I appreciate there are many ways of borrowing money at stupidly high interest rates but a PCP is not one of them.

But as I said above look around and there may well be a lower rate but taking that rate could loose you several thousands in manufacturers contributions. But if you can get a lower rate (or have the cash), have the PCP, grab the contribution and pay off in 14 days then you are quids in.

PCP vs Lease - SLO76
“ Yet people on here think they are being robbed when a PCP has a rate of 6% (that is the highest I have seen advertised) and many are lower.”

Perhaps on new cars but on used motors it’s typically 9.9% APR or more which compared to a typical bank loan at 3% APR adds thousands to the total cost. I get why people take a new car on a subsidised PCP but on used metal it makes no sense at all. It is however pushed heavily by dealers and all too popular among those who refuse to research before buying.
 

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