So, who here is on a PCP/Leasing plan?
Discussion
As the financially savvy part of the forum I'm curious to know how you fund your cars, in particular from those who are 'comfortable' financially.
A blanket opinion would assume most have bought their cars with cash, so they own the 'asset' rather than having scheduled payments (a liability).
But this got me thinking:
I've often read that wealthy people own assets and have no liabilities. So in this context I'm trying to work out what is financially best when it comes to car buying.
Thoughts and opinions welcome
A blanket opinion would assume most have bought their cars with cash, so they own the 'asset' rather than having scheduled payments (a liability).
But this got me thinking:
- Is a car an asset or a liability? - is this dependant on how the car has been purchased? eg. cash = asset or finance plan = liability
- Isn't Leasing/PCP a really smart idea? - Why pay the full amount for a car when you can just 'lease' for far less, throw the rest of the capital into a SS ISA/Fund and let it grow.
I've often read that wealthy people own assets and have no liabilities. So in this context I'm trying to work out what is financially best when it comes to car buying.
Thoughts and opinions welcome
I own all my three vehicles. However I do not have a penchant for new shiny things...… (newest vehicle is nine years old)
I do however maintain the vehicles well despite their value/ age.
I am not wealthy, but I do believe I am wealthier for this approach. Plus I still enjoy my motoring..... (maybe not in the Nissan Note )
I save monthly for my next purchase and only ever spend what I have saved (nowadays, anyway)
I can see the attraction of leasing, but not particularly PCP. But then again, financially I would still be hesitant leasing a vehicle as I just don't need (or want) the latest shiniest vehicle.
Mike
I do however maintain the vehicles well despite their value/ age.
I am not wealthy, but I do believe I am wealthier for this approach. Plus I still enjoy my motoring..... (maybe not in the Nissan Note
)I save monthly for my next purchase and only ever spend what I have saved (nowadays, anyway)
I can see the attraction of leasing, but not particularly PCP. But then again, financially I would still be hesitant leasing a vehicle as I just don't need (or want) the latest shiniest vehicle.
Mike
JaredVannett said:
As the financially savvy part of the forum I'm curious to know how you fund your cars, in particular from those who are 'comfortable' financially.
A blanket opinion would assume most have bought their cars with cash, so they own the 'asset' rather than having scheduled payments (a liability).
But this got me thinking:
I've often read that wealthy people own assets and have no liabilities. So in this context I'm trying to work out what is financially best when it comes to car buying.
Thoughts and opinions welcome
The relevant measure is the cost of finance versus the risk and tax-adjusted return on the asset.A blanket opinion would assume most have bought their cars with cash, so they own the 'asset' rather than having scheduled payments (a liability).
But this got me thinking:
- Is a car an asset or a liability? - is this dependant on how the car has been purchased? eg. cash = asset or finance plan = liability
- Isn't Leasing/PCP a really smart idea? - Why pay the full amount for a car when you can just 'lease' for far less, throw the rest of the capital into a SS ISA/Fund and let it grow.
I've often read that wealthy people own assets and have no liabilities. So in this context I'm trying to work out what is financially best when it comes to car buying.
Thoughts and opinions welcome
(Plus of course allowing for any difference in the cost of the vehicle under the two different approaches).
Edited by sidicks on Saturday 14th July 17:18
Learnt a long time ago that car depreciation is one of the biggest costs in life. Thankfully I don’t care how old my cars are, so I aim to lose no more than £1,000 - 1,500 a year in depreciation.
4 cars between me and the Mrs and only 1 is depreciating (partly due to the mileage spread across them all).
4 cars between me and the Mrs and only 1 is depreciating (partly due to the mileage spread across them all).
I actually quite like leasing the 2 cars in our hosuehold, a fixed monthly price, no MOT or tax to worry about and avoiding the various hassles that come with car ownership and subsequent selling / trade in of them.
Although i could buy them outright i prefer money to be tied up in appreciating assets (btls)
Although i could buy them outright i prefer money to be tied up in appreciating assets (btls)
PCP1, Lease 1, bought 1,
On the pcp I buy used but with makers warranty, and sell it with at least 6 months makers warranty privately.
I want a Range Rover but the 2 year warranty isn’t transferable (because they know they just don’t last I guess). So trying to decide what to do next.
On the pcp I buy used but with makers warranty, and sell it with at least 6 months makers warranty privately.
I want a Range Rover but the 2 year warranty isn’t transferable (because they know they just don’t last I guess). So trying to decide what to do next.
Interesting viewpoints so far, thanks
I have done PCP once, and bought all my other cars for cash - I'll expand on that shortly...
I only every bought one car on PCP (new), it was a performance vehicle that I could not buy outright. I enjoyed having the new car but after one year I got rid because:
I sold the car with small positive equity and ended the PCP. I now drive around in an old 2002 Merc and I'm enjoying a bit of bangernomrics. But it's funny, I feel like this car is an asset and liability. I own the whole thing, but I fear given the age/mileage potential MOT failures and repair bills.
Butter Face said:
I for one am very happy that we’re covering this on PH again 
Lol, oh I'm all to aware of the many PCP threads on here. My intention with this thread was to gain an understanding what those who are financially comfortable choose to do. For example, is PCP simply for people who cannot afford to pay in full for a new car.... or do those who are smart with money also see it 'opportunity' to drive a new car with minimal outlay and throw the rest of their capital into investments? 'sidicks' post (above) makes a good point.I have done PCP once, and bought all my other cars for cash - I'll expand on that shortly...
DSLiverpool said:
PCP1, Lease 1, bought 1,
On the pcp I buy used but with makers warranty, and sell it with at least 6 months makers warranty privately.
I want a Range Rover but the 2 year warranty isn’t transferable (because they know they just don’t last I guess). So trying to decide what to do next.
Used PCP? - Hmm, isn't the APR typically horrendous on those?On the pcp I buy used but with makers warranty, and sell it with at least 6 months makers warranty privately.
I want a Range Rover but the 2 year warranty isn’t transferable (because they know they just don’t last I guess). So trying to decide what to do next.
I only every bought one car on PCP (new), it was a performance vehicle that I could not buy outright. I enjoyed having the new car but after one year I got rid because:
- Once the novelty had worn off (a few months), the monthly payments started to irritate me. I could afford them, no financial hardship or anything but they were high (performance car).
- To make the above worse, six months later the manufacturer had already updated the model (facelift), and folks on forums were reporting the new PCP deals they were getting with lower deposits and lower montlies by £100-£150. I had bought the first production year and got the 'best' deal at the time.
I sold the car with small positive equity and ended the PCP. I now drive around in an old 2002 Merc and I'm enjoying a bit of bangernomrics. But it's funny, I feel like this car is an asset and liability. I own the whole thing, but I fear given the age/mileage potential MOT failures and repair bills.
As a general rule of thumb, in life, you want to OWN appreciating assets and RENT depreciating ones.
This is why most who can choose to buy a house (I understand some will choose not to for non-financial personal reasons).
I could afford to buy a new car (just about), but choose to lease. I like the certainty it gives me over costs, and the ability to have a new car every couple of years. Cash is preserved to invest in my business if an opportunity presents itself, or elsewhere.
There are also some great deals about. An S4 for 2 years at £299 a month inc VAT for example I think makes more sense that buying.
The downside is that I feel compelled to take whatever the manufacturers are pushing out when I need to order, and that I cannot add options to the car, without ruining the finances of the deal. I end up with a car that is not perfect for me, but usually close enough.
Our family car is different, usually a keeper so specc'd to our needs. PCP works better providing you watch the finance rate.
This is why most who can choose to buy a house (I understand some will choose not to for non-financial personal reasons).
I could afford to buy a new car (just about), but choose to lease. I like the certainty it gives me over costs, and the ability to have a new car every couple of years. Cash is preserved to invest in my business if an opportunity presents itself, or elsewhere.
There are also some great deals about. An S4 for 2 years at £299 a month inc VAT for example I think makes more sense that buying.
The downside is that I feel compelled to take whatever the manufacturers are pushing out when I need to order, and that I cannot add options to the car, without ruining the finances of the deal. I end up with a car that is not perfect for me, but usually close enough.
Our family car is different, usually a keeper so specc'd to our needs. PCP works better providing you watch the finance rate.
I've done everything from sub £1k 'bangernomics' to owning 3-year old luxury cars to buying brand new in cash and more recently leasing a variety of cars.
There are benefits to every type of ownership/hire option. Bangernomics is fun (in a slightly penny-pinching and perverse way) and definitely a good option if you're looking to save some cash; buying a 3 or 5 year old highly-specced luxury car for the cost of a new Ford Focus is undoubtedly not a bad option too. Owning/hiring a brand new car also has significant advantages although is usually the most costly option. With a brand new car, my current preferred method is leasing, provided you are flexible with the car you're willing to end up with to take advantage of some of the excellent deals.
I decided I wanted a new car, because:
a) I use it daily and spend a lot of time in it. I wanted it to be specced to my own taste and not someone else's.
b) I wanted something that would be covered by manufacturer warranty for the period of ownership to avoid unexpected bills.
c) Related to the above, I don't like nasty surprises. I've had some superb used cars, but I have also had a couple of lemons that have cost me plenty!
d) I didn't want the hassle of the annual MOT.
e) Well, why not? I can comfortably afford to and I enjoy the new car buying experience.
I could afford to buy in cash, but chose to lease primarily because:
1) The lease cost over the term was actually lower than the predicted depreciation over the same (three-year) period
2) Leasing fixes the cost over the term; no surprises when you come to sell and end up having to sell for much less than you envisaged when you purchased the car.
3) I like to change my cars fairly often. Leasing fixes me into a deal and forces me not to keep swapping cars and losing considerable money in the process. However, the ability to chose a two or three year deal allows for a fairly short 'ownership'.
4) I can put the capital I'd have used to buy the car outright to better use elsewhere.
5) There is less hassle. At the end of the deal you simply hand the keys back and job done. No having to barter with used car buyers or lose your shirt on a part-ex deal.
That said, I've more recently become attached to the idea of aiming to keep a car for the long-term (10 or even 20 years). If I'm still of this opinion when I come to change cars next, I'll almost certainly buy brand new outright (or using PCP if the numbers work better to unlock deals that are only available when you take finance).
There are benefits to every type of ownership/hire option. Bangernomics is fun (in a slightly penny-pinching and perverse way) and definitely a good option if you're looking to save some cash; buying a 3 or 5 year old highly-specced luxury car for the cost of a new Ford Focus is undoubtedly not a bad option too. Owning/hiring a brand new car also has significant advantages although is usually the most costly option. With a brand new car, my current preferred method is leasing, provided you are flexible with the car you're willing to end up with to take advantage of some of the excellent deals.
I decided I wanted a new car, because:
a) I use it daily and spend a lot of time in it. I wanted it to be specced to my own taste and not someone else's.
b) I wanted something that would be covered by manufacturer warranty for the period of ownership to avoid unexpected bills.
c) Related to the above, I don't like nasty surprises. I've had some superb used cars, but I have also had a couple of lemons that have cost me plenty!
d) I didn't want the hassle of the annual MOT.
e) Well, why not? I can comfortably afford to and I enjoy the new car buying experience.
I could afford to buy in cash, but chose to lease primarily because:
1) The lease cost over the term was actually lower than the predicted depreciation over the same (three-year) period
2) Leasing fixes the cost over the term; no surprises when you come to sell and end up having to sell for much less than you envisaged when you purchased the car.
3) I like to change my cars fairly often. Leasing fixes me into a deal and forces me not to keep swapping cars and losing considerable money in the process. However, the ability to chose a two or three year deal allows for a fairly short 'ownership'.
4) I can put the capital I'd have used to buy the car outright to better use elsewhere.
5) There is less hassle. At the end of the deal you simply hand the keys back and job done. No having to barter with used car buyers or lose your shirt on a part-ex deal.
That said, I've more recently become attached to the idea of aiming to keep a car for the long-term (10 or even 20 years). If I'm still of this opinion when I come to change cars next, I'll almost certainly buy brand new outright (or using PCP if the numbers work better to unlock deals that are only available when you take finance).
Helicopter123 said:
As a general rule of thumb, in life, you want to OWN appreciating assets and RENT depreciating ones.
I’m not sure where that rule of thumb comes from. If things are priced fairly then you’ll be paying for the depreciation on the car that you use whether you own it or not.Whoever is renting you the car won’t have forgotten to include the depreciation costs when they worked out the finance plan.
James_B said:
Helicopter123 said:
As a general rule of thumb, in life, you want to OWN appreciating assets and RENT depreciating ones.
I’m not sure where that rule of thumb comes from.He knew how to accumulate wealth
James_B said:
Helicopter123 said:
As a general rule of thumb, in life, you want to OWN appreciating assets and RENT depreciating ones.
I’m not sure where that rule of thumb comes from. If things are priced fairly then you’ll be paying for the depreciation on the car that you use whether you own it or not.Whoever is renting you the car won’t have forgotten to include the depreciation costs when they worked out the finance plan.
Helicopter123 said:
James_B said:
Helicopter123 said:
As a general rule of thumb, in life, you want to OWN appreciating assets and RENT depreciating ones.
I’m not sure where that rule of thumb comes from.He knew how to accumulate wealth
Did a few calcs the other day as I'm trying the idea of swapping the van and don't have the cash, for most things over a few years I think buying outright and financing via a bank loan then flogging for residual works cheaper - which is kind of exactly what a lease co does to make profit!
If you're not fussy what it is then there can be some good deals pushed by manufacturers with stock to offload but they're the exception, I think a lot of people use that infamous lease/depreciate to justify something they want and avoid the stigma / pretend they're not "borrowing money"
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