Personal Lease vs PCP?

Discussion in 'Insurance & Finance' started by Sooty_uk, Apr 1, 2014.

  1. Sooty_uk

    Sooty_uk Hardcore MB Enthusiast

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    Hi everyone,
    I looking to buy my very first band new car, in the past I have always bought my cars 2nd hand and paid cash.

    I want to set the mileage at 15k a year (I normally do about 16-17k) and will pay the extra when I hand the car back. I plan on changing the car every 2 to 3 years and would like any views on if I should do a lease or PCP.

    I got a few quotes and the lease works out as quote a bit cheaper for me both per month and initial payment. I just wanted to know if there is any benefit for me going for a PCP over a lease? I know at the end of the lease that I will have to pay another initial deposit and start over again where as on a PCP I have the chance to build up equity in the car which I can then use for a deposit on the next car...

    MAIN QUESTION: How likely is it that I will have enough equity in the car to enable me to put down a similar deposit next time around?
    I know no dealer will answer this question as they cant guarantee it but I just wanted to know everyone's experience.
     
  2. OP
    OP
    Sooty_uk

    Sooty_uk Hardcore MB Enthusiast

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    Example Car: Mercedes C250 Coupe AMG Sport Edition Auto with Premium Plus package & privacy glass

    EXAMPLE LEASE: 24 months @ £300 plus 9 months deposit (£2,700) and includes road tax
    EXAMPLE PCP: 36 months @ £370 plus £5,000 deposit

    I don't mind paying the £5/6k deposit if I know I will build that up as equity and use it as the next deposit.
     
  3. Dryce

    Dryce MB Club Veteran

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    The problem is that many deals don't leave any equity - despite what the dealers say.

    Take a look at the actual second hand values of cars similar to the one you're speccing up before convincing yourself that there will be any 'equity' left in the PCP. And figure that based on what you'd get (ie. part-ex) rather than what you'd pay (eg. approved used sticker prices).

    Any deal I've looked at recently where it's been PCP vs contract hire - the PCP deal has generally been inferior.

    Also - bear in mind that if you want any options added to the car over and above the package on offer and you'll get disproportionately gouged on contract hire.

    Also - bear in mind that with these sort of deals - and particularly contract hire - that they are not flexible should your circumstances change during its term.
     
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  4. Dryce

    Dryce MB Club Veteran

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    So £412.50 / month

    £508 / month - so over 36 months it's costing you about £3.5K more. Are you sure that the car will be worth that over and above the final payment at the end of the deal?


    Also as regards the mileage and paying when you hand the car back. Not usually the best way. It's usually cheaper to get the higher mileage in the deal from the start. It may also even be negotiable if you are able push hard enough.
     
  5. Charles Morgan

    Charles Morgan MB Club Veteran

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    When I got quotes on my new car, PCP was £120 a month more expensive than PCH, the latter getting metallic paint as part of the deal, so another £500 ish.

    So over 4 years I am saving £5760.

    As Dryce says, agree the miles in advance. You'll pay a lot less.

    The chances you will have any equity in a PCP are close to zero.
     
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  6. developer

    developer MB Club Veteran

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    As a rule of thumb, work on options costing £30/month per £1000 retail cost.

    Those must haves add up rather quickly.
     
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  7. OP
    OP
    Sooty_uk

    Sooty_uk Hardcore MB Enthusiast

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    Hi thanks for your reply it was very helpful.

    I think a lot of people get caught up in the "guaranteed final value" when all it really means is that you can hand the car back at the end without owing anything.

    I know it's best to look for a car with the spec you want as standard as adding options shoots the price up hence I was looking at the premium plus pack as it has everything I want
     
  8. OP
    OP
    Sooty_uk

    Sooty_uk Hardcore MB Enthusiast

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    I don't see the point in me getting a PCP then, the only think I thought would be nice is if I built up equity. I don't see the point in paying extra when I plan to change the car every few years, the car won't be mine
     
  9. OP
    OP
    Sooty_uk

    Sooty_uk Hardcore MB Enthusiast

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    I am looking at getting the Premium Plus pack as a lot of places are throwing this in now... I guess MB are trying to sell off all the current shape C-Class's ready for the new shape that is due out... I don't mind not having the new one giving that I am paying the same price as a Mondeo.

    I did look at some Audi's but find they lack basics such as cruse control... Starting to add all these little things on a lease shoots the price up.
     
  10. Khamen

    Khamen Hardcore MB Enthusiast

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    It's always tough to advise, as different people have different priorities. A couple of things I would think about tho.

    1. Always pay a deposit rather than multiple advance rentals if you are going to put some cash in. Deposit incurs no interest, advanced rents do
    2. Assume you will have zero equity at the end of any finance deal. You may be able to get a bit under private sale, but imagine best case is no loss
    3. Watch the mileage. You are doing a lot of miles for a guaranteed future value deal. You may get charged 10-15p per mile you go over. Loading lots of miles into the deal at the start has a huge and disproportionate effect on the monthly cost
    4. Make sure that any monthly cost you arrive at is comfortable. Do NOT step up a model or add masses of extras just because the headline figure is achievable at a stretch. You still have to run the thing, and expensive options do not help future values
    5. If you are going to keep the car for more than 3 years, or if there is a strong chance you will need to DO NOT take out any guaranteed future value deal. Once you're in you are on a 2-3 year change cycle treadmill, if you want to finance over longer then loan with no residual (i would never recommend that for a new car unless you could guarantee its value will increase - rare indeed!)
    6. GAP insurance is very useful to have if you are buying a high value financed vehicle, but ONLY if you will have a sizeable equity gap (low deposit/very fast depreciation). Avoid other financial insurance products

    Good luck!
    K
     
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  11. Spin_bowler

    Spin_bowler Hardcore MB Enthusiast

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    ^^lot of sense written in that post.
     
  12. EClassy

    EClassy Hardcore MB Enthusiast

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    I disagree with this. I took out a PCP on my car and I was given a GFV. I took out a PCP because I knew from day one that I was going to buy the car at the end of the PCP. At the end of the deal, I paid the GFV and the car was mine. Looking at similar cars on retailers websites gave prices that were up to £3500 more. Over 3 years, the car cost me approximately £1100/year in interest payments.

    I would say if you have any plans of buying the car at the end of the deal, then PCP. If you know you wont be needing the car past the end of the deal period, then a lease.
     
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  13. Smatt

    Smatt Hardcore MB Enthusiast

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    -Or HP, which although costs more per month, means less interest is paid
     
  14. Hitman999

    Hitman999 Hardcore MB Enthusiast

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    My current 3 year PCP deal is due to end this August.

    From my personal experience the dealer has advised me the car is already worth less than the GFV. The prices on the current C class have slumped quite a bit especially with the new model due out in June. I will be handing back and walking away. I will need to pay some excess mileage charge and have been looking through the hand back procedure. Interesting on the options at the end of the PCP they want to know if you are sticking with another Mercedes or going to another manufacturer for your next car. I wonder if they would offer you a better deal if you were moving to another manufacturer?

    I think overall the PCP has cost me more and this time around I will be going for a lease deal or HP. It's all swings and roundabouts. You got to decide on a lease deal are you happy to pay a fixed cost over a period and not own the car? A PCP gives no guarantees either. Buying outright you will lose a lot of money too unless you hang onto the car for many years.

    Good luck with it.
     
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  15. EClassy

    EClassy Hardcore MB Enthusiast

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    Correct. HP means at the end of the deal you own the car outright with nothing else to pay after your last monthly payment.

    I didnt go for HP though cause I wanted the flexibility of the low monthly payments and the chance to be able to return the car incase things didnt go too well for me in the better paying new job I had resumed about a year earlier.

    Things went well, I had saved up the GFV in 2 years from buying the car and just paid it off at the end of the deal.
     
  16. OP
    OP
    Sooty_uk

    Sooty_uk Hardcore MB Enthusiast

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    Thanks... I will be placing an order this week.
    I sold my CLK last week so have lovely Astra to drive
     
  17. OP
    OP
    Sooty_uk

    Sooty_uk Hardcore MB Enthusiast

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    Thanks for the advice guys... In the end I went for a E220 SE CDI partly because it comes pretty much with all the kit I wanted as standard... Should have it delivered by this time next week :)
     
  18. Paddcomp

    Paddcomp Hardcore MB Enthusiast

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    What sort of deal did you end up with? Duration, payments, options etc. Always good to see some real life prices not just advertised prices.
    TIA
     
  19. OP
    OP
    Sooty_uk

    Sooty_uk Hardcore MB Enthusiast

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    Car: E220 CDI SE
    Options: Metallic Paint & 7 Speed Automatic


    - I am paying £331 per month for 24 months + £2,979 (9 months) upfront payment and that is for 16k miles a year.

    - If you want 10k miles a year then it it is around £288 per month for 24 months + £2,592 upfront.

    If you want to go for the AMG Sport model rather than the SE model then it is an extra £29.50 per month

    That is for a personal lease and includes VAT

    I went for the E-Class in the end over the C-Class as it worked out cheaper... This is because it had all the kit I wanted as standard plus the optional extras were included in the price :)
     
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