PCP better than buying for 20K+ miler?

[Agent Orange]

I did a TCO on my car (BMW E39 530i Touring) the other weekend as it’s coming to the end of its life for me. I’ve always dismissed the idea of PCP due to the mileage I do (20-25K per year) and being a personal customer rather than business. However the figures actually appear to be appealing because I do high miles – unless I’m missing something and that’s what I’m asking.

Am I missing something?

I’ve never bought new and always bought 3-5 year old cars around 20-40K miles on the clock for £15-20K. Generally I’ve run them until around 80-90K, sold and replaced with like.

The current E39 I’ve owned since early 2006 (90 months) and has just ticked over 190K miles. I've possibly owned it 2 years too long but my TCO calculates that it has cost me:

£16K+ in depreciation (assuming worth about £2K now – bit optimistic)
£40K in fuel
£3.5K insurance
£6K in maintenance
£2.5k servicing
£400 MOT
£1.5K tyres

Add all that up and this works out about £800 per month to run my E39 over its lifetime of which fuel (28-30mpg) is £450 of that monthly figure.

A £15K loan will cost £400 per month which would get me a 3 year old VW Passat estate 2.0 TDI returning 65mpg – therefore roughly halving my fuel costs. So £650 per month plus maintenance, servicing, insurance, MOT, car tax and tyres to replace and run the car.

At £12K loan will cost £350 per month and would buy a 3 year old Skoda Octavia estate 2.0 TDI returning 65mpg - £600 per month plus maintenance, servicing, insurance, MOT, car tax and tyres.

Or I can get a new Skoda Octavia estate 2.0 TDI returning 65mpg for £325 per month with 20K mileage allowance on PCP. £575 per month plus cheaper or zero maintenance as new and a lot covered under warranty, servicing, insurance, no MOT or car tax and tyres.

This doesn’t seem right to me but looking at these figures it seems to say I can fix my costs, never have a huge unexpected bill (such as auto box rebuild on the E39) and have a nice new car. Note “a nice new car” is not important to me but if I get one for the same price as used why wouldn’t I? A comfortable, fuel efficient estate with reduced monthly cost is.

[rfoster]

I'd also suggest looking at a longer term hire purchase instead of PCP - you'll probably pay less interest over the term and you have the added benefit of no mileage restrictions. You may find a 48 /54 or 60 month HP agreement works out at a similar payment or less than the PCP.

[Agent Orange]

True I guess the MPG is a little optimistic but my daily commute is 95% motorway and dual carriage way. Regardless though I take your point and thanks for the pointer re: maintenance items. Though to be honest no worse than a BMW.

My main aim is to reduce the cost of getting to work in a car. Has to be a car as public transport not realistic. Stating the bleedin obvious I know but doing 20K+ a year my biggest costs are fuel and depreciation. Closely followed by maintenance. I used to view my cars as luxury assets but have come to see them as consumable items recently. I'm also starting to object to throwing £2K at a £2K car to rebuild the gearbox. Especially as will likely need a suspension refresh soon.

PCP appears to smooth the costs of depreciation and maintenance (due to warranty and being a new car) and enable me to fix my outgoings. I'll look at the longer term hires thanks though I've not seen these being routinely offered? Any pointers as to how offers them?

[AGK]

Most companies won't offer a PCP on a vehicle that will be older than 5 years at the end of the term.

I wouldn't declare massive mileage on a PCP deal up front. Keep it minimum as excess mileage only comes into play if you hand the keys back and walk away.

[rfoster]

AGK said:

Most companies won't offer a PCP on a vehicle that will be older than 5 years at the end of the term.

I wouldn't declare massive mileage on a PCP deal up front. Keep it minimum as excess mileage only comes into play if you hand the keys back and walk away.

They're getting better - we're currently doing PCP's on cars up to 5 years old at the beginning of the agreement (and up to 9 years old at the end). The balloons do tend to be quite conservative - ideally the finance company would like you to get to the final balloon and actually have some equity in the vehicle. Always worth comparing PCP with a longer term HP as well.

[AGK]

rfoster said:

They're getting better - we're currently doing PCP's on cars up to 5 years old at the beginning of the agreement (and up to 9 years old at the end). The balloons do tend to be quite conservative - ideally the finance company would like you to get to the final balloon and actually have some equity in the vehicle. Always worth comparing PCP with a longer term HP as well.

That's good to hear. Previously it's always been cheaper to go brand new vs used for that reason. (In my circumstances).

[Welshbeef]

Have a look at contract hire they are doing. 330d MSport tourings f31 with business nav for £412pcm incl vat. (Think the down payment would be 3-5 months). Also you can add in the 5 year 50k service pack which you'd certainly use and make a saving on.

Much better getting a cracking deal on a £40 k car and its fun instead of a euro box for low to mid 20's or in the teens.

Whatever you do enjoy.

[Agent Orange]

AGK said:

Most companies won't offer a PCP on a vehicle that will be older than 5 years at the end of the term.

I wouldn't declare massive mileage on a PCP deal up front. Keep it minimum as excess mileage only comes into play if you hand the keys back and walk away.

I'd want to return the car after 3-5 years and get another. I assume that counts as walking away? I guess what I want is a long term rental and when the car gets long in the tooth I hand back and get another. I've come to the conclusion I have zero desire to own a car for commuting but need the use of one on a daily basis.

rfoster said:

They're getting better - we're currently doing PCP's on cars up to 5 years old at the beginning of the agreement (and up to 9 years old at the end). The balloons do tend to be quite conservative - ideally the finance company would like you to get to the final balloon and actually have some equity in the vehicle. Always worth comparing PCP with a longer term HP as well.

That's interesting always assumed it was for new only.

Welshbeef said:

Have a look at contract hire they are doing. 330d MSport tourings f31 with business nav for £412pcm incl vat. (Think the down payment would be 3-5 months). Also you can add in the 5 year 50k service pack which you'd certainly use and make a saving on.

Much better getting a cracking deal on a £40 k car and its fun instead of a euro box for low to mid 20's or in the teens.

Whatever you do enjoy.

That does seem a good deal. Thanks

[AGK]

Agent Orange said:

I'd want to return the car after 3-5 years and get another. I assume that counts as walking away? I guess what I want is a long term rental and when the car gets long in the tooth I hand back and get another. I've come to the conclusion I have zero desire to own a car for commuting but need the use of one on a daily basis.

If you had equity in the car you would trade it in against the new car so to speak and the excess mileage charge won't come in to play...

Edited by AGK on Friday 11th October 11:17

[Piersman2]

I was going to say look at contract hires as well, I've seen a flyer about the office here saying that Mercs are doing C220 (or something like that) for £329 a month.

Seemed quite cheap to me, but then I've not used finance for years so not sure whether there's better out there.

[Shurv]

They key to cheap motoring is to buy new on a PCP when there are strong manufacturer offers.There's a bundle of 0% or low rate PCP's out there at the moment as manufacturers bust their balls trying to get their registrations up.Declare the correct mileage, NEVER declare a lower mileage ( it's a false economy)as you'll end up owing more than the GFV at the end.Keep for 3 years then swap into another one. As your mileage is lower,ie, 60k over the 3 years, you'll only pay for the 1st 2 services ( assuming on 20k service schedules), as when the MOT and 3rd one is due, you'll trade the car in for another. My feeling for buying cars is you either buy new and often,or buy used and run until the wheels fall off. Good luck with whatever you decide to do. Oh yes, go into your dealership in the last few days of the month, you'll get a better deal.

[Agent Orange]

Thanks Shurv. Good info and matches what I'm seeing.

I've seen a load of 0% deals out there right now and just so happens they match with the target monthly spend I was planning.

[Broccers]

Normal private lease - how much does that work out at on the skoda?

http://www.contracthireandleasing.com/

£412 per month for a new car and hand it back after 2 years. Guess serving and tyres are a factor on 40k miles.

http://www.contracthireandleasing.com/car-leasing-...

Edited by Broccers on Monday 14th October 15:15

[Shurv]

Be careful of contract hire deals, they are very expensive to get out of if you want to change early. Leases not so bad. A PCP or HP for that matter, is easy to either settle or change.