New Car: PCP vs Lease vs Finance vs Outright
Discussion
Hi all
Long time lurker here, decided I would finally make an account and ask for advice
I want a Mini Cooper / Countryman and have been looking at various lease, pcp options. I honestly can't figure out what makes more sense. I could be completely misinterpreting things but to me it looks like pcp makes no sense whatsoever. Here is an example:
Mini Cooper S Sport LEASE - 9 upfront / 23 months - £228 pm inc VAT
Mini Cooper S Sport PCP (from mini direct) - £2000 upfront / 24 months - £391 pm inc VAT
Mini Cooper S Sport PCP Divide (from mini direct) - 51% upfront / 24 months - £1 pm inc VAT then remaining 49% at 24 months
Now I get that with lease you're not supposed to be able to buy the car but in my experience, most leasing companies will sell you the car when you get to the end of the term if you want it. For what price though is unknown.
However, if you take a PCP to guarantee you can buy the car at the end if you want it, you end up paying almost double the monthly cost anyway for it and if you decide you don't want it at the end of the term well its as if you leased the car for 100% more per month.
Am i missing something or does PCP make absolutely no sense? If I want the car it seems like i am better off just buying it outright or with a bank loan and then selling it when i no longer want it which with mini's depreciation being about 10% per year I would be substantially better off. The other option is the PCP divide which you pay 50% upfront for and then 0% interest PCP for 2 years and then pay it off. I guess this could work too
Some advice would be really appreciated
Thank you
Long time lurker here, decided I would finally make an account and ask for advice
I want a Mini Cooper / Countryman and have been looking at various lease, pcp options. I honestly can't figure out what makes more sense. I could be completely misinterpreting things but to me it looks like pcp makes no sense whatsoever. Here is an example:
Mini Cooper S Sport LEASE - 9 upfront / 23 months - £228 pm inc VAT
Mini Cooper S Sport PCP (from mini direct) - £2000 upfront / 24 months - £391 pm inc VAT
Mini Cooper S Sport PCP Divide (from mini direct) - 51% upfront / 24 months - £1 pm inc VAT then remaining 49% at 24 months
Now I get that with lease you're not supposed to be able to buy the car but in my experience, most leasing companies will sell you the car when you get to the end of the term if you want it. For what price though is unknown.
However, if you take a PCP to guarantee you can buy the car at the end if you want it, you end up paying almost double the monthly cost anyway for it and if you decide you don't want it at the end of the term well its as if you leased the car for 100% more per month.
Am i missing something or does PCP make absolutely no sense? If I want the car it seems like i am better off just buying it outright or with a bank loan and then selling it when i no longer want it which with mini's depreciation being about 10% per year I would be substantially better off. The other option is the PCP divide which you pay 50% upfront for and then 0% interest PCP for 2 years and then pay it off. I guess this could work too
Some advice would be really appreciated
Thank you
^Indeed.
LudicrouslyJuicy said:
The other option is the PCP divide which you pay 50% upfront for and then 0% interest PCP for 2 years and then pay it off. I guess this could work too
That's effectively 50% depreciation in 2 years! Think i'd settle for a 1 year old car and not faff around with the optional payment or whatever equity you might, or might not, have left over.A lease is (almost) completely inflexible. If your personal circumstances change, you are stuck with the car.
A PCP can be terminated half way through, I believe, or earlier if you pay off the difference.
Buying with a bank loan gives you much more flexibility. If the car no longer meets your needs you can change it anytime, although you've still got the loan liability.
My 2p worth: lease or PCP can be good for a _second_ car, or primary car if cheap enough and/or your circumstances are stable.
A PCP can be terminated half way through, I believe, or earlier if you pay off the difference.
Buying with a bank loan gives you much more flexibility. If the car no longer meets your needs you can change it anytime, although you've still got the loan liability.
My 2p worth: lease or PCP can be good for a _second_ car, or primary car if cheap enough and/or your circumstances are stable.
Just work our what’s cheapest over the term you’ll want to keep it for and go with whatever works numbers wise.
For me it’s been leasing for the past few vehicles but if you are hard and fast stuck towards a particular car/model and want to add options and view to keep for a while then leasing probably won’t be for you.
It’s all circumstantial !
For me it’s been leasing for the past few vehicles but if you are hard and fast stuck towards a particular car/model and want to add options and view to keep for a while then leasing probably won’t be for you.
It’s all circumstantial !
LeoSayer said:
That's a very conservative figure.
I would be very keen to know what you think an accurate depreciation rate is for it and the countryman? Judging by the used ads I've come across over the last 12 months it seems 10% is about right but I will defer to those who know better fido said:
That's effectively 50% depreciation in 2 years! Think i'd settle for a 1 year old car and not faff around with the optional payment or whatever equity you might, or might not, have left over.
Sorry i am not quite following your train of thought. Why would the upfront equate to the depreciation? The two are not linked are they? By that rationale if I bought the car outright it would be 100% depreciation but we know that's not the caseEdible Roadkill said:
Just work our what’s cheapest over the term you’ll want to keep it for and go with whatever works numbers wise.
For me it’s been leasing for the past few vehicles but if you are hard and fast stuck towards a particular car/model and want to add options and view to keep for a while then leasing probably won’t be for you.
It’s all circumstantial !
Yep I completely understand what you're saying. It is what I tried to do by comparing 2 like-for-like 24 month terms : one pcp and one lease. The PCP is what I couldn't figure out because for the same upfront, the same total term, I would be paying twice as much for the PCP over the lease and that didn't make any sense to me. I would have expected the lease would be the most expensive option alwaysFor me it’s been leasing for the past few vehicles but if you are hard and fast stuck towards a particular car/model and want to add options and view to keep for a while then leasing probably won’t be for you.
It’s all circumstantial !
With the countryman the variance becomes even crazier. Can be leased for 221 - 250 pm inc vat but cheapest PCP on mini website is 571 pm inc vat. Like why would anyone ever go for a pcp?
It should be easy enough to conclude.
For my current car I lease at 9+47 for 400 a month. This includes the options I want and road fund included which is 500 a year.
If I pcp’d the dealer wanted 10k deposit and 500 a month and a 22k balloon. Around 7k interest paid over this term. This before the options I wanted and I’d be paying the road fund licence on top, another 50 quid a month.
Cash wasn’t considered as I wouldn’t throw 60k on the table in one go. It’s madness.
Either or whichever way acquired I’d not want to keep longer than 4yrs.....for any daily driver that goes for. Leasing wins hands down for me this time!! And also the past 3 cars I just cannot see around it!!
For my current car I lease at 9+47 for 400 a month. This includes the options I want and road fund included which is 500 a year.
If I pcp’d the dealer wanted 10k deposit and 500 a month and a 22k balloon. Around 7k interest paid over this term. This before the options I wanted and I’d be paying the road fund licence on top, another 50 quid a month.
Cash wasn’t considered as I wouldn’t throw 60k on the table in one go. It’s madness.
Either or whichever way acquired I’d not want to keep longer than 4yrs.....for any daily driver that goes for. Leasing wins hands down for me this time!! And also the past 3 cars I just cannot see around it!!
PCP's are very rarely a cheaper option than leasing as they are weighted towards the final payment and people who are looking to own the vehicle IME. With those leases there will be no option to purchase or the price for the car will be substantially larger than with the PCP you mention.
Just remember with lease that if you are considering adding any options you will have to pay most if not all of the cost over the 2 year term which can increase the cost dramatically.
Just remember with lease that if you are considering adding any options you will have to pay most if not all of the cost over the 2 year term which can increase the cost dramatically.
LudicrouslyJuicy said:
Edible Roadkill said:
Just work our what’s cheapest over the term you’ll want to keep it for and go with whatever works numbers wise.
For me it’s been leasing for the past few vehicles but if you are hard and fast stuck towards a particular car/model and want to add options and view to keep for a while then leasing probably won’t be for you.
It’s all circumstantial !
Yep I completely understand what you're saying. It is what I tried to do by comparing 2 like-for-like 24 month terms : one pcp and one lease. The PCP is what I couldn't figure out because for the same upfront, the same total term, I would be paying twice as much for the PCP over the lease and that didn't make any sense to me. I would have expected the lease would be the most expensive option alwaysFor me it’s been leasing for the past few vehicles but if you are hard and fast stuck towards a particular car/model and want to add options and view to keep for a while then leasing probably won’t be for you.
It’s all circumstantial !
With the countryman the variance becomes even crazier. Can be leased for 221 - 250 pm inc vat but cheapest PCP on mini website is 571 pm inc vat. Like why would anyone ever go for a pcp?
Remember car salesmen don’t sell cars, they sell finance!
Edible Roadkill said:
Because pcp is still the mainstream way the public buy cars and the nice man in the suit is quick to convince you that he’s your mate and that’s the best deal you’ll ever get. 9/10 will accept his story without even looking elsewhere.
Remember car salesmen don’t sell cars, they sell finance!
The word being "buy". I've seen plenty of 0% APR PCP deals where if you genuinely wanted to own the vehicle it was a better option than cash with the contributions included.Remember car salesmen don’t sell cars, they sell finance!
Assuming you don't want to "buy" the car and just use it for 2-3 years leasing is 99% of the time the better solution.
Horses for courses.
SWoll said:
Edible Roadkill said:
Because pcp is still the mainstream way the public buy cars and the nice man in the suit is quick to convince you that he’s your mate and that’s the best deal you’ll ever get. 9/10 will accept his story without even looking elsewhere.
Remember car salesmen don’t sell cars, they sell finance!
The word being "buy". I've seen plenty of 0% APR PCP deals where if you genuinely wanted to own the vehicle it was a better option than cash with the contributions included.Remember car salesmen don’t sell cars, they sell finance!
Assuming you don't want to "buy" the car and just use it for 2-3 years leasing is 99% of the time the better solution.
Horses for courses.
If it’s just a daily work horse that’s gonna plunge in value then why own it. That’s my outlook.
What is the lesser evil when the end experience is exactly the same!?
I’d also rent a prostitute over buying one....every time!!
Some things are just best rented.
I gave up trying to understand the logic behind arguments for and against PCPs and Leases. Tbh nothing I have seen regarding these discussions has convinced me that anyone understands what they're talking about so just get whichever is cheapest and fits your strategy of owning vs using. I personally wouldn't want the car beyond 3 years as warranties then become an issue. I would rather 'rent' a mini for 3 years and give it back at that point.
p.s. there is no such thing as a free lunch - the cost is the cost and someone is paying for it regardless of what structure you opt for
In a PCP deal - you borrow x % at a fixed rate with the assumption that the car is worth y at the end of the term. Therefore there is an assumption that the depreciation curve is parallel to the amortisation that leads to the terminal value
If that were the case, and you found lease deals at substantially below the cost of the PCP it would mean that the leasing company have got their residual values wrong and will be in for a shock when the term is up. It's mutually exclusive, both the PCP and the lease residuals cant be the same over the same terms, same miles and yet have different monthly costs. This is usually why leases are a bit more expensive - because they follow the same PCP structure albeit with an additional cost for the administration of the lease
So, in short, if you have a lease deal that is 50-75% of the cost of the PCP then either the PCP is way out of whack or the lease deal should be snapped up
Also I think you're underestimating the depreciation curve massively. a typical PCP assumes 50% depreciation over the course of 36 months or approximately 15% per year at normal mileage and in good condition. Looking at auto trader on a few 2016 models with chili packs and jcw kits (most closely related to cooper s sport now) they are about £15k-£16k. That is about 40-45% depreciation assuming they sell at asking price.
p.s. there is no such thing as a free lunch - the cost is the cost and someone is paying for it regardless of what structure you opt for
In a PCP deal - you borrow x % at a fixed rate with the assumption that the car is worth y at the end of the term. Therefore there is an assumption that the depreciation curve is parallel to the amortisation that leads to the terminal value
If that were the case, and you found lease deals at substantially below the cost of the PCP it would mean that the leasing company have got their residual values wrong and will be in for a shock when the term is up. It's mutually exclusive, both the PCP and the lease residuals cant be the same over the same terms, same miles and yet have different monthly costs. This is usually why leases are a bit more expensive - because they follow the same PCP structure albeit with an additional cost for the administration of the lease
So, in short, if you have a lease deal that is 50-75% of the cost of the PCP then either the PCP is way out of whack or the lease deal should be snapped up
Also I think you're underestimating the depreciation curve massively. a typical PCP assumes 50% depreciation over the course of 36 months or approximately 15% per year at normal mileage and in good condition. Looking at auto trader on a few 2016 models with chili packs and jcw kits (most closely related to cooper s sport now) they are about £15k-£16k. That is about 40-45% depreciation assuming they sell at asking price.
LudicrouslyJuicy said:
I would be very keen to know what you think an accurate depreciation rate is for it and the countryman? Judging by the used ads I've come across over the last 12 months it seems 10% is about right but I will defer to those who know better
You can't rely on used car price - that's generally a retail or optimistic price.There are a few online tools for finding trade car prices eg. try getting a price from webuyanycar for a 3 year old example. I noticed that website themoneycalculator has a depreciation calculator. Don't know if that's any use.
I don't know the likely depreciation on a countryman, but using the above method should give you a good indication.
richard-8zwx3 said:
If you lease, someone (probably quite good at it) is doing the negotiating on the initial purchase price on your behalf and then advertising @ lowest they can.
This may be a valid point. I would consider leasing from a lender which tends to allow purchasing of the car. VWFS are good for this, and fairly often they allow a price which is competitive I believe. I purchased a skoda I leased in last year or two and it was close to we buy any car price.Gassing Station | Car Buying | Top of Page | What's New | My Stuff