Discussion
After resisting the idea all our lives we're now thinking of taking the new plunge on our first new car. I think I understand the basic difference between PCP and PCH, but can more experienced PHers on here offer any objective thoughts on what might be the best way of paying for it?
Looking for an ICE 4x4, not BEV as we've got that covered. Paying up to £300 a month or thereabouts and chucking a deposit of up to £5k or so at it.
Thanks in advance for any thoughts.
Looking for an ICE 4x4, not BEV as we've got that covered. Paying up to £300 a month or thereabouts and chucking a deposit of up to £5k or so at it.
Thanks in advance for any thoughts.
If I were you I would search out ‘not a guru’ on YouTube, he does a fair job of explaining the pros and cons but you’ll probably need to subscribe to get access to all his advice.
You’ll get a mixed bag on here, along with some snide stuff about putting yourself in debt for a new car. My view is that sometimes a straight lease makes more sense than contract purchase or outright purchase, but there are too many variables to say which is the best option, much depends on your circumstances, the vehicle itself and prevailing interest rates.
Leaseloco is a decent aggregator and gives you a comparison between PCH and PCP, though I’m not convinced by the accuracy of their figures. Some manufacturers offer very low or zero interest deals, so if you’re not too fussy about a specific car that can be a very cost effective way to go.
You’ll get a mixed bag on here, along with some snide stuff about putting yourself in debt for a new car. My view is that sometimes a straight lease makes more sense than contract purchase or outright purchase, but there are too many variables to say which is the best option, much depends on your circumstances, the vehicle itself and prevailing interest rates.
Leaseloco is a decent aggregator and gives you a comparison between PCH and PCP, though I’m not convinced by the accuracy of their figures. Some manufacturers offer very low or zero interest deals, so if you’re not too fussy about a specific car that can be a very cost effective way to go.
Check the total cost of ownership for both options including deposit, interest and payments over the term.
Having said that I wouldn’t choose either. A HP deal will cost less over the duration of ownership but the monthly payments may be higher. You can extend the period of the loan to reduce the payments. HP can be finance from the car company or a personal loan from a bank.
All subject to the APR’s you are offered.
Bottom line, don’t just focus on the monthly payments as so many people do, focus on the total cost of ownership
Having said that I wouldn’t choose either. A HP deal will cost less over the duration of ownership but the monthly payments may be higher. You can extend the period of the loan to reduce the payments. HP can be finance from the car company or a personal loan from a bank.
All subject to the APR’s you are offered.
Bottom line, don’t just focus on the monthly payments as so many people do, focus on the total cost of ownership
Blue62 said:
You'll get a mixed bag on here, along with some snide stuff about putting yourself in debt for a new car.
I get that, we've always bought used in the past but walking the line between 'bargains' and the high maintenance/repair costs that always seem to go with them has worn us down a bit! Blackpuddin said:
Yes thanks I wasn't sure whether HP was a realistic option, it used to have a bad name but I do like the idea of owning the vehicle at the end plus the freedom from PCP/PCH stress of having to keep the car in decent nick and under a certain mileage.
That really only applies to PCH (leasing) where you will handing it back at the end of the term. With a PCP you are less likely to just be handing it back and taking a mileage/condition penalty unless its one of the EV subsidised deals - although these factors are always going to strongly affect the value of any car regardless of the payment vehicle.Mark V GTD said:
Blackpuddin said:
Yes thanks I wasn't sure whether HP was a realistic option, it used to have a bad name but I do like the idea of owning the vehicle at the end plus the freedom from PCP/PCH stress of having to keep the car in decent nick and under a certain mileage.
That really only applies to PCH (leasing) where you will handing it back at the end of the term. With a PCP you are less likely to just be handing it back and taking a mileage/condition penalty unless its one of the EV subsidised deals - although these factors are always going to strongly affect the value of any car regardless of the payment vehicle.Blackpuddin said:
Yes thanks I wasn't sure whether HP was a realistic option, it used to have a bad name but I do like the idea of owning the vehicle at the end plus the freedom from PCP/PCH stress of having to keep the car in decent nick and under a certain mileage.
PCH is a lease.PCP is a purchase product, similar to HP but has a deferred balloon payment, and with the option to hand the car back to the finance company if you don't want to complete the purchase. When you complete the PCP, you will own the car in the same way as with HP.
Mileage limits are not relevant to PCP unless you plan to hand the car back, and in any case, there is plenty of debate whether extra mileage charges are even enforceable.
There's more to this lark than meets the eye!
Another part of the reason for not having gone down this route before is having to expose ourselves to dealers and brokers. I'm a grizzled old git with a low tolerance for folk who have an interest in exploiting my ignorance. We went to a Toyota dealer last week where I was assured by a young herbert that the noise a 2.5 RAV 4 with a CVT box makes under hard acceleration is the electric motor kicking in. I got told off by the missis for my frosty response.
Another part of the reason for not having gone down this route before is having to expose ourselves to dealers and brokers. I'm a grizzled old git with a low tolerance for folk who have an interest in exploiting my ignorance. We went to a Toyota dealer last week where I was assured by a young herbert that the noise a 2.5 RAV 4 with a CVT box makes under hard acceleration is the electric motor kicking in. I got told off by the missis for my frosty response.
Just tried the Money Supermarket calculator to compare PCP to HP for a notional five-year 9.9% APR deal on a £15,000 car. With a £3,000 deposit, the total cost of the HP deal comes out at £18,120. The same deal on a PCP is £13,800 + an estimated balloon payment of £5,400, for a total of £19,200.
Blackpuddin said:
Ah, so do most PCP clients pay the balloon amount to own it (or 'trade it in' for another PCP deal) rather than handing their cars back?
I would think the majority utilise the equity in the car by part exing it (that way the general condition obviously comes in to play but there is no mileage penalty as such, the car is evaluated on its current condition/mileage and the balloon payment subtracted). with a PCP you can get out of it at any time by asking for a 'settlement figure' and either paying it off or 'selling' to a third party who will pay it off and give you whats remaining. I have done that mostly on the dozen or so PCP deals I have had in the last 25 years.Mark V GTD said:
Blackpuddin said:
Ah, so do most PCP clients pay the balloon amount to own it (or 'trade it in' for another PCP deal) rather than handing their cars back?
I would think the majority utilise the equity in the car by part exing it (that way the general condition obviously comes in to play but there is no mileage penalty as such, the car is evaluated on its current condition/mileage and the balloon payment subtracted). with a PCP you can get out of it at any time by asking for a 'settlement figure' and either paying it off or 'selling' to a third party who will pay it off and give you whats remaining. I have done that mostly on the dozen or so PCP deals I have had in the last 25 years.You're very welcome - I have always been comfortable with PCP so long as I have got a good discount off the bottom line price and the finance APR is acceptable. Have a look at whats on Drivethedeal - they are a reputable broker and a lot of their offers will be subject to taking the manufacturers PCP finance (often in the form of a deposit contribution) but I have had quite a few very satisfactory purchases via them over the years.
Update - just had a peep at their current offers - £8,000 off an audi Q2 looks good!
Update - just had a peep at their current offers - £8,000 off an audi Q2 looks good!
Edited by Mark V GTD on Sunday 18th January 17:21
Blackpuddin said:
Forgive the nosiness but were all or most of your deals on new cars?
Every one, apart from a Mercedes SLC 200, was new and mainly via a broker for maximum discount. Yes, asking for an £8k discount on any car, new or used (apart from through a broker) might be a bit ambitious!Have also had a few PCH's - so long as they were stonking deals (always chase the deal rather than the car if you go down this route).
Edited by Mark V GTD on Sunday 18th January 17:58
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