Cash, PCP or Lease

[carfun]

Hello Piston Heads

I am starting a new job soon where my car millage will go from 6k milles anually to 15k miles

So i am looking for a new car (got my eye on the new 2019 mercedes A class Diesel)

Heres my question, which would financially work out better, people are telling me to go for PCP as i will just pay for the depreciation but i cant see how this would work out better for me

Cash
A 2019 plate A class on Autotrader is £23,566. over 3 years worst case senario this would be worth £13,000 with 45k miles on the clock. therefore cost to me around 10k over 3 years

PCP
£10,000 deposit
£78.24 x 36 payments = 2816
subtotal £12,816

Option to buy £13,528
Total £26,344

Just in terms of of the depreciation surely cash would be better as i am avodiing the interest

am i missing something when it comes to PCP, when i do the calcs cash always seems better and i can sell the car after 3 years as in the long term would work out cheaper

Edited by carfun on Sunday 29th December 16:48

[anonymous-user]

That must be a nasty interest rate on a used A-class. Cash is clearly better than that deal if you’re willing to have it tied up in the car.

To be honest I think you’re missing a trick, and that is that it makes no sense to buy a year old used car when a brand new one can be had for the same price. Huge discounts on them through brokers at the moment, have a look on Drive The Deal or Broadspeed.

[loskie]

I do 20 000m per year and find the best financial solution is to buy a car privately for around £5k and run it for 5 years or so. I have also had a new V50 and Astra lease still find the £5k solution the best.
Currently have a CRV CDTi 2007 bought 18m ago with 75000 on for £4400 IIRC

[mrpbailey]

You’d have to be mad to put £10k deposit down on a PCP!!

[The_Nugget]

You could probably lease a brand new one for about £12k over 3 years and not tie up your capital.
That’s what I’d be doing if I was set on a new/nearly new car.

The private purchase, you are carrying all of the risk of 2nd hand values and tying your cash up, for little reward.

[Dr Jekyll]

mrpbailey said:

You’d have to be mad to put £10k deposit down on a PCP!!

Why?
Because if you have £10k available you don't need a PCP?

[DoubleD]

I would wait a few months to see how your new job/commute works out before committing to anything.

[Jamescrs]

If you did go down the PCP route rather than dropping a 10k deposit would it not be more beneficial to go for a much lower deposit, which will of course mean higher month on month payments but you could use your 10k to offset those payments whilst in theory still making interest on the remainder of your 10k lump sum?

I'm no PCP expert so I maybe missing a trick somewhere as in would the overall cost be increased at the end of term by a lower deposit and higher payments?

[ZedZed_UK]

carfun said:

Hello Piston Heads

Heres my question, which would financially work out better, people are telling me to go for PCP as i will just pay for the depreciation but i cant see how this would work out better for me

Cash
A 2019 plate A class on Autotrader is £23,566. over 3 years worst case senario this would be worth £13,000 with 45k miles on the clock. therefore cost to me around 10k over 3 years

PCP
£10,000 deposit
£78.24 x 36 payments = 2816
subtotal £12,816

Option to buy £13,528
Total £26,344

Edited by carfun on Sunday 29th December 16:48

Using your figures:

PCP - you pay £12.8k to drive the car for 3 years.
Cash - you pay £23,566, then sell after 3 years for £13000. So "cost" to you is £10,566

So ... £12800 - £10566 = you're £2234 better off.

However:

1) You had to part with £23,566 "up front" for the car. That money could have been invested/saving for you if you'd been down the PCP route. Not inconceivable that if you'd made a smaller PCP up front contribution and invested the rest over 3 years (taking out of the investment when you need it for payments) that you might have made around £1k on the investment. So that's halved your "PCP saving".
2) What happens in 3 years if diesel is an even dirtier word, and you don't get the £13k you think you're due?

There's no "right answer" here ... but if £24k is the sum total of your savings then I wouldn't be investing it into a car. It's always good to have some cash in the bank for rainy days or unexpected occurences ... having it all tied up in an asset that you can't easily liquidate (like a car) isn't something I would do. Of course ... if the PCP rates are shocking that's something else ... even an unsecured loan on the value (or part of it) of the car might be a better way to go?

[Dr Jekyll]

Jamescrs said:

If you did go down the PCP route rather than dropping a 10k deposit would it not be more beneficial to go for a much lower deposit, which will of course mean higher month on month payments but you could use your 10k to offset those payments whilst in theory still making interest on the remainder of your 10k lump sum?

I'm no PCP expert so I maybe missing a trick somewhere as in would the overall cost be increased at the end of term by a lower deposit and higher payments?

The higher deposit the lower the total cost AOTBE.

[Deadlysub]

Or you could get a loan, rates are as low as 2.8% and keep your capital. If you take the loan over 5 years then the repayment amounts will be low and you can settle it in three years time.

Used car PCP is expensive.