So, who here is on a PCP/Leasing plan?
Discussion
I currently have four cars:
Indy - paid cash, own out right (this is my track car, don't want anything expensive as it gets thrashed)
Honda Jazz - paid cash, own out right (this is for the kids to use, will use it for a down payment on something more interesting when they go to Uni)
Mazda MX-5 - bought with a traditional bank loan and cash, will own out right September 2019 (this I'm keeping long term, its my sunny days and weekend away car)
Volvo XC90 - rented via a PCP, will be swapped for something similar when the PCP ends September 2019
I've no intention of keeping an expensive SUV diesel long term, I just see them depreciating like mad in the near future due to emissions and changing tastes so a PCP or lease protects me from that as fixed cost over the ownership period (if I do end up with equity at the end then that is a bonus not a given on my numbers). PCP worked out cheaper than leasing for the car and spec I wanted at the time. The Volvo costs me less than 10% of my net a month.
Indy - paid cash, own out right (this is my track car, don't want anything expensive as it gets thrashed)
Honda Jazz - paid cash, own out right (this is for the kids to use, will use it for a down payment on something more interesting when they go to Uni)
Mazda MX-5 - bought with a traditional bank loan and cash, will own out right September 2019 (this I'm keeping long term, its my sunny days and weekend away car)
Volvo XC90 - rented via a PCP, will be swapped for something similar when the PCP ends September 2019
I've no intention of keeping an expensive SUV diesel long term, I just see them depreciating like mad in the near future due to emissions and changing tastes so a PCP or lease protects me from that as fixed cost over the ownership period (if I do end up with equity at the end then that is a bonus not a given on my numbers). PCP worked out cheaper than leasing for the car and spec I wanted at the time. The Volvo costs me less than 10% of my net a month.
del mar said:
I have looked at it before, but was put off by the amount you pay out vs virtually nil return.
If I was spending £20k over say 4 years at the end of the period I would like to see some return.
I guess it depends on how much the peace of mind is worth and how much you value being in a new car. Personally, I don't get all giddy about having a USB plug fitted as standard If I was spending £20k over say 4 years at the end of the period I would like to see some return.
I'd only spend more than 10k on a car if it was something really interesting. I work with plenty of people who have spent big money on shopping trolleys. I can't quite get my head round spending £25k on something with a 2.0 TDI under the bonnet.
RTB said:
I guess it depends on how much the peace of mind is worth and how much you value being in a new car. Personally, I don't get all giddy about having a USB plug fitted as standard
I'd only spend more than 10k on a car if it was something really interesting. I work with plenty of people who have spent big money on shopping trolleys. I can't quite get my head round spending £25k on something with a 2.0 TDI under the bonnet.
What if it could read out text messages ......I'd only spend more than 10k on a car if it was something really interesting. I work with plenty of people who have spent big money on shopping trolleys. I can't quite get my head round spending £25k on something with a 2.0 TDI under the bonnet.
del mar said:
What if it could read out text messages ......
You mean like a phone can anyway?Autonomous driving is a big selling point for me. I do a lot of long, boring drives on smart motorways full of traffic and speed cameras to get somewhere interesting to do something fun. For the car to take most of the tedium out of the drive thats worth paying for me as its currently limited to new or nearly new cars.
Eventually we'll get to the point that I don't have to pay attention to the drive in a future car and then I'll be over the moon, but currently its like smart phones ten years ago where it was worth upgrading to a new device. At some point we'll get a pool of cheap second hand cars that are good enough for most people.
Those days I'm actually driving on interesting roads I have other cars for that, or I can always not turn on the autonomous driving.
A real asset puts money in your pocket each month
A real liability takes money out of your pocket
Ive not owned a car yet that goes up in value and costs nothing to run, to they have all been liabilities
One way or another, the first owner pays the depreciation on a new car, it doesnt matter how its wrapped up in finance schemes, someone has to pay it. So thats costing you 1/2 the value ish in the first 3 years for the pleasure of experiencing/renting a new car .You cant get away from that, unless you buy used.
A real liability takes money out of your pocket
Ive not owned a car yet that goes up in value and costs nothing to run, to they have all been liabilities
One way or another, the first owner pays the depreciation on a new car, it doesnt matter how its wrapped up in finance schemes, someone has to pay it. So thats costing you 1/2 the value ish in the first 3 years for the pleasure of experiencing/renting a new car .You cant get away from that, unless you buy used.
I love it on the leasing thread where someone posts a great car with cheap monthly payments but neglects to point out it is limited to 5K miles a year. Seriously if you are doing that low mileage why on earth would you want to pay £200 a month just to drive a new car as that works out to 48p a mile.
Aside from the occasional seriously cheap deals such as the Golf R/GTi from a few years ago and the recent Hyundai i30/Seat Arona the majority of lease deals do not seem that great to me. And when these great deals do turn up you have to be lucky enough to need a car there and then as they are usually gone in a day or two.
I am clearly in the minority though as it seems lots of people are happy to spend 300 or 400 a month to lease a car for three years and have nothing to show for it at the end.
Aside from the occasional seriously cheap deals such as the Golf R/GTi from a few years ago and the recent Hyundai i30/Seat Arona the majority of lease deals do not seem that great to me. And when these great deals do turn up you have to be lucky enough to need a car there and then as they are usually gone in a day or two.
I am clearly in the minority though as it seems lots of people are happy to spend 300 or 400 a month to lease a car for three years and have nothing to show for it at the end.
Doesn't it depend on how much value you associate with that ~£400? £400 a month for somebody on a net £2k a month who also has a mortgage and kids it's a lot of money. For somebody on a net £5k a month with a small mortgage and no kids then it really isn't a lot of money out of their regular outgoings unless they decide it is.
swerni said:
bogie said:
A real asset puts money in your pocket each month
A real liability takes money out of your pocket
A real liability takes money out of your pocket
an item of property owned by a person or company, regarded as having value and available to meet debts, commitments, or legacies.
As already stated, an asset can appriciate or depreciate.
...in my own common sense personal finance world I dont quite get how having a car on PCP in negative equity that needs taxing and servicing is anything other than a liability
bogie said:
A real asset puts money in your pocket each month
A real liability takes money out of your pocket
Ive not owned a car yet that goes up in value and costs nothing to run, to they have all been liabilities
One way or another, the first owner pays the depreciation on a new car, it doesnt matter how its wrapped up in finance schemes, someone has to pay it. So thats costing you 1/2 the value ish in the first 3 years for the pleasure of experiencing/renting a new car .You cant get away from that, unless you buy used.
This.A real liability takes money out of your pocket
Ive not owned a car yet that goes up in value and costs nothing to run, to they have all been liabilities
One way or another, the first owner pays the depreciation on a new car, it doesnt matter how its wrapped up in finance schemes, someone has to pay it. So thats costing you 1/2 the value ish in the first 3 years for the pleasure of experiencing/renting a new car .You cant get away from that, unless you buy used.
Although I maintain that you can lease a new car and pay c. 20% of list for 2 years/10k miles if you can be flexible on model.
Someone is taking a hit, most probably the manufacturer to shift excess stock.
Helicopter123 said:
Someone is taking a hit, most probably the manufacturer to shift excess stock.
I am sure there is some truth in this.Question is one of degree - something like 85% of new cars are financed in one way or another; it just can't be the case that all of those were excess stock being shifted.
The savvy PH'er that changes deal opportunistically based on what pops up and is flexible on model / brand / term is in the minority.
Surely the only liability with a PCP is the obligation to make the payments you signed up for in the agreement. You make all those payments and you have an asset at the end equal to the value of the car at that time. Or you walk away and forget about it instead of making the final payment.
Own 3 cars, all bought used with the most expensive £17k for a Mercedes C class. Bought all 3 using unused funds in my offset mortgage at 1.99%. Down payment was my trade in, then topped up from my mortgage. Figured out how long I wanted to keep the car, estimated the depreciation and calculated my repayment. Complete flexibility - recently decided I wanted to contribute more to my pension so decided to plan on keeping the Mercedes for longer and reduced my repayment. Works for me. Could have paid cash for the cars but I’d rather have it invested with interest rates so low.
Personally, I think it all depends on the lease deal you can get your hands on. Like anything, there are offers at various times of the year that are advantageous.
My view is that running a car of pretty much any kind (Unless it's a rare old Porsche) is going to lose you money in some way or form. If not from depreciation then some big repair bill for your banger (blah blah, my Lexus has run for 400k miles with only a lightbulb)... its all about risk and how long you want to keep the car.
In my case I find leasing the perfect solution for switching cars and keeping money in my pocket for longer instead of being tied up in a car.
I took my tax rebate from last year and could either buy a car outright (~5 years old) or lease one brand new over 2 years (The period I normally switch cars in).
I put a deposit down, took the rest of the money and threw it into the stock market on medium / high risk tech stocks. So far the stocks have given me enough of a return to pay 5 months lease payments over and above the capital invested, and I'm only 3 months into doing this. Of course, the huge risk is if the stocks plummet, but I watch them daily and will pull the money as soon as I feel its time and throw it back into an account that feeds the monthly lease payment.
This works for me because I got a great lease deal, had the full balance of the lease in a lump sum and am fairly savvy with investments. Each to their own, and everyone is different.
My view is that running a car of pretty much any kind (Unless it's a rare old Porsche) is going to lose you money in some way or form. If not from depreciation then some big repair bill for your banger (blah blah, my Lexus has run for 400k miles with only a lightbulb)... its all about risk and how long you want to keep the car.
In my case I find leasing the perfect solution for switching cars and keeping money in my pocket for longer instead of being tied up in a car.
I took my tax rebate from last year and could either buy a car outright (~5 years old) or lease one brand new over 2 years (The period I normally switch cars in).
I put a deposit down, took the rest of the money and threw it into the stock market on medium / high risk tech stocks. So far the stocks have given me enough of a return to pay 5 months lease payments over and above the capital invested, and I'm only 3 months into doing this. Of course, the huge risk is if the stocks plummet, but I watch them daily and will pull the money as soon as I feel its time and throw it back into an account that feeds the monthly lease payment.
This works for me because I got a great lease deal, had the full balance of the lease in a lump sum and am fairly savvy with investments. Each to their own, and everyone is different.
If you have the choice, it purely comes down to the TCO and DCF. Whether that’s cash, PCH, PCP, PCP then settling immediately to take advantage of manufacturer incentives, it doesn’t matter. Just run the numbers and do what’s most cost effective. Don’t listen to people who say they gain 50% p.a. return on their investments etc. You can’t use this as a realistic IRR for these purposes (well, you can, but then you’d never actually buy anything as your whole life would be a leveraged bet).
I’ve got 3 vehicles, 1 is PCH and 2 were cash purchases:
Audi Allroad (2018) - PCH was circa 40% lower TCO than heavily discounted cash purchase based on NPV of rentals and projected future value. No way would I want to carry the residual risk on this car, lease wins by a country mile.
VW California Ocean (2017) - cash purchase due to rock solid residuals. VW PCP was just dreadful. Out of idle curiosity, I punched it into WBAC last week and they offered £1K less than I bought it for 13 months ago from VW (£50K + vehicle). Private sale I’d at least get my money back (there is a big private sale market for these). I’m therefore happy holding the residual risk on this and cash is king.
Subaru Forester (2014, bought at 6 months old) - cash purchase due to 5 year warranty, so longer ownership cycle. Will probably keep forever anyway as dog / tip / rough winter car. Depreciated circa £200 a month based on WBAC valuation, lease would be double. Cash is king.
In summary, there is no right or wrong answer. It depends on the vehicle and the offers available but it’s good to have the choice. I spent 20 years in the leasing industry, so know this stuff inside out and every which way. I’ve done a few vehicle leases over the years (when they’ve been like the Allroad deal) but don’t generally eat my own dog food, as they say, purely based on the TCO. Hope this gives some food for thought.
I’ve got 3 vehicles, 1 is PCH and 2 were cash purchases:
Audi Allroad (2018) - PCH was circa 40% lower TCO than heavily discounted cash purchase based on NPV of rentals and projected future value. No way would I want to carry the residual risk on this car, lease wins by a country mile.
VW California Ocean (2017) - cash purchase due to rock solid residuals. VW PCP was just dreadful. Out of idle curiosity, I punched it into WBAC last week and they offered £1K less than I bought it for 13 months ago from VW (£50K + vehicle). Private sale I’d at least get my money back (there is a big private sale market for these). I’m therefore happy holding the residual risk on this and cash is king.
Subaru Forester (2014, bought at 6 months old) - cash purchase due to 5 year warranty, so longer ownership cycle. Will probably keep forever anyway as dog / tip / rough winter car. Depreciated circa £200 a month based on WBAC valuation, lease would be double. Cash is king.
In summary, there is no right or wrong answer. It depends on the vehicle and the offers available but it’s good to have the choice. I spent 20 years in the leasing industry, so know this stuff inside out and every which way. I’ve done a few vehicle leases over the years (when they’ve been like the Allroad deal) but don’t generally eat my own dog food, as they say, purely based on the TCO. Hope this gives some food for thought.
swerni said:
DT398 said:
Surely the only liability with a PCP is the obligation to make the payments you signed up for in the agreement. You make all those payments and you have an asset at the end equal to the value of the car at that time. Or you walk away and forget about it instead of making the final payment.
You’ve perfectly described a liability a liability is defined as the future sacrifices of economic benefits that the entity is obliged to make to other entities as a result of past transactions or other past events,[1] the settlement of which may result in the transfer or use of assets, provision of services or other yielding of economic benefits in the future.
Interesting responses... pretty much a subjective topic then.
I guess it's a case of do what is right for you.
One thing I will say for PCP/Leasing is to truly work out the cost over the term, if your ok with the number looking back at you go for it. I say this from experience as it's so easy to concentrate on the monthlies and miss the big picture.
I guess it's a case of do what is right for you.
One thing I will say for PCP/Leasing is to truly work out the cost over the term, if your ok with the number looking back at you go for it. I say this from experience as it's so easy to concentrate on the monthlies and miss the big picture.
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