Have I got this right? Leaseing??

hargi · 27 May 2013 at 20:39

On the look out for a new car? Last time I bought one it was put a deposit down pay £100 a month for 4 years and the car was mine.

Seen some advertised where you pay a deposit pay £99 a month for 2 years and then get the option to pay £xxxx at the end to buy the car but you can't do more then 9000 miles a year or you can return the car? This is what's confusing me.

At the moment I have my car which I can part ex as part of the deposit then say I pay the 99 a month for 2 years at the end of that do I either have to buy the car out right or return it?? As then it looks like if I return it I have lost all money on it and then would not have a deposit for the next car? Or is there other options?

Isn't it better to put down a deposit and then do monthly payments to buy the car out right ?

Randomface74 · 27 May 2013 at 20:43

owning a car isn't a good idea because it's not an investment - essentially the monthly payment covers the depreciation plus some

leasing is a good way of making the cost of car ownership predictable tho, but you pay above the odds, kinda like insurance

SDK^ · 27 May 2013 at 20:44

hargi said:
Isn't it better to put down a deposit and then do monthly payments to buy the car out right ?

Sure it is, but the monthly payments will be a lot higher.

Lease deals are setup for people who want a new car but can't afford the higher repayments.

One · 27 May 2013 at 20:46

Isn't he describing PCP, what with the previously agreed balloon payment for acquisition at the end of the contract? If sop tehre are often benefits of having this style of finance over more common contract hire and lease purchase.

hargi · 27 May 2013 at 20:51

Cheers pcp is what it was. Just been looking at the vw site . It says with this option I can give it back. Buy out right or trade it in.
Now say I trade it in after two years what happens then?
Won't it be the same as giving it back and starting a new pcp? Or am I missing something?

SDK^ · 27 May 2013 at 20:55

hargi said:
Now say I trade it in after two years what happens then?
Won't it be the same as giving it back and starting a new pcp? Or am I missing something?

Trade it in = pay the final balance and then trade the car in against something else.

The car won't be yours until you pay the final balance on it. You are effectively hiring the car during the lease period.

[TW]Fox · 27 May 2013 at 20:58

hargi said:
Now say I trade it in after two years what happens then?

If the tradein value is less than the GFV (Guaranteed Future Value) on the PCP, then nothing - you are essentially starting again.

If the tradein value is higher than the GFV, you get the difference between the two figures to put towards your next car.

Won't it be the same as giving it back and starting a new pcp? Or am I missing something?

If the car is worth less than the GFV, yes, it's the same as doing that.

hargi · 27 May 2013 at 21:08

Thanks I get it now.
So is generally which is better value pcp or hp?

[TW]Fox · 27 May 2013 at 21:12

hargi said:
Thanks I get it now.
So is generally which is better value pcp or hp?

HP is generally better value than PCP in that the total cost is lower as the interest rates tend to be lower. However, because with HP you are financing the entire outstanding balance without a 'GFV', the monthly payments are higher. The benefit of PCP is that it lowers the monthly payments meaning you can 'get' a car you'd peraps not otherwise be able to afford, but at a penalty of it costing you more overall.

One · 27 May 2013 at 21:18

[TW]Fox;24351775 said:
If the tradein value is less than the GFV (Guaranteed Future Value) on the PCP, then nothing - you are essentially starting again.

If the tradein value is higher than the GFV, you get the difference between the two figures to put towards your next car.

If the car is worth less than the GFV, yes, it's the same as doing that.

You can then finance the GFV with a more standard contract hire scheme, e.g. you pay £100 a month for 2 years with a GFV of £10000, you then take out finance on the £10k. Also if the car is worth less than the GFV then you can come to an agreement on a lower price, although this will be up to whether the finance company agree it is worth less than the GFV.

A lot of brands have their own term for it. VWGroup call it 'Solutions', Ford call it 'Options'. It simply gives you a range of choices at the end of the term.

Really you need to weigh it up, see what you would pay on all the different available plans and also factor in how future life events may altar your end desire.

If you never have ownership of a car in sight then you're locked into monthly payments which require a stable income, whereas if you own the car you've been paying on for 4 years then you can keep it for another 5 with only maintenance costs. However if you know you're just going to get another brand new car in 2-3 years time then why even consider the idea of ownership?

alex24 · 27 May 2013 at 21:22

Do remember, some dealers will offer 0% or competitive rates on PCP, as opposed to HP. They often push this as it has lower terms and therefore return custom is likely to be more regular. The dealer from which I purchased my Fiesta were offering much better rates on PCP.

If you really want to know what's better though, you'll have to do the maths and factor in the terms that suit you best and also monthly payment affordability. Do also remember, that if you exceed the stated mileage on a PCP deal, the cost penalty on return is often much higher than simply overestimating at the start.

One · 27 May 2013 at 21:29

alex24 said:
Do remember, some dealers will offer 0% or competitive rates on PCP, as opposed to HP. They often push this as it has lower terms and therefore return custom is likely to be more regular. The dealer from which I purchased my Fiesta were offering much better rates on PCP.

If you really want to know what's better though, you'll have to do the maths and factor in the terms that suit you best and also monthly payment affordability. Do also remember, that if you exceed the stated mileage on a PCP deal, the cost penalty on return is often much higher than simply overestimating at the start.

Yes, the GFV or residual value of the car is calculated using a number of variables, mileage obviously being a key variable. You often get things such as maintence chucked in for free with PCP too. Really it's just a case of playing with the numbers to see what works out best and what suits your needs best. Any sales rep at the dealerships should be able to talk you through the finance plans they offer and go through the maths with you.

[TW]Fox · 27 May 2013 at 21:50

desires said:
You often get things such as maintence chucked in for free with PCP too.

Actually this isn't very common - maintained leases are common for business users on straight leases but not with standard PCP's. Where it does happen it's usually just a case of an already available maintenance package being added to the car, and thus to the finance, as an option.

ie - a 1 Series can have a 5 year servicing package added for £350 at time of purchase. Therefore it's easily to have a PCP that also includes this.

Any sales rep at the dealerships should be able to talk you through the finance plans they offer and go through the maths with you.

And once they have done so, take the figures away for a think and go through them with an impartial third party.

There is so much BS around regarding how to buy cars (cash, finance, whatever) that it can be a real minefield to know whats truely best. You get people who only ever pay cash who will argue for ever that anyone who doesnt do the same cant afford to buy a car whilst totally ignoring the fact that everyone has differing circumstances. Then you get those always take finance because they didnt have the cash arguing that cash is for morons and they took finance becuase its cheaper, blah blah. People get very funny when it comes to discussing money.

There is an example of the sort of meaningless comments you'll tend to find in this very thread:

owning a car isn't a good idea because it's not an investment

What does that even mean, for example? Your washing machine isn't an investment either, yet you buy that - last years holiday had instanteously savage depreciation and you buy that, too...

Django x2 · 27 May 2013 at 22:52

A great article in last months CAR magazine highlighting why leasing, in most cases, was better value (or cheaper TCO) than buying. They took a new 320d Touring over lease for three years and buy over three years and calculated all GFV and trade in prices. Lease cost was £14k, buying cost was £22k..... That was for new cars though. I was fortunate enough at the end of 2008 to get a great lease deal which really suited me as rates were stupid low back then. That changed for a long time, but now, certainly for new cars, lease companies are really fighting for your business. It's always worth a look. However, for even more precious metal, Porsche for example, there was only a £100 difference, in favour of buying....

SDK^ · 28 May 2013 at 07:44

Django x2 said:
They took a new 320d Touring over lease for three years and buy over three years and calculated all GFV and trade in prices. Lease cost was £14k, buying cost was £22k.

Does this take into account the asset you own, or part own in your example (albeit depreciating) with the buy option?
The spend will obviously be less with a lease because you are only funding depreciation not the full purchase.