to want to buy a new (second hand) car rather than lease a new car

[Hotfootit]

We have two cars. Our second car is breaking down and the MOT is due very soon. Our first (family) car has been in the garage for 6 weeks and we have tried to manage with one car. We can just about do it, but it's a real performance and we've had ask for lifts to out of school activities (not being a CF as we've given most of these friends reciprocal lifts at one time or another).

DH wants to look into leasing a new car (is it PCP?). I think I would rather buy second hand and then we will will own the car (might have to buy with a bit finance, we're not sure yet). We've had what is now our second car for 12 years - we bought it second hand and it was our only car for 9 years, and was the first car either of us had ever owned - so we're not into changing cars regularly. What are the benefits of a leased car?

I do about 20k a year. Is that too much to get a lease car ? I'm sort of assuming it would really push the price up.

So you accept that, for some people, it is a financially sensible option?

It's true that the car will have outstanding finance on it but you are the registered keeper with a car on PCP. Obviously no finance of any kind ever would be the ideal for many people but it's also not practical for the majority.

I'm not clear from the OP if the plan is to buy a new (second hand) car from savings or whether to take out a loan to buy a second hand car. I think that makes quite a big difference as to whether PCP is the option that best suits the OP's needs or not.

If I had the money in the bank and could afford to do so I would probably buy something that was two or three years old outright and then "pay myself back" as it were by way of a fixed amount every month. In that circumstance I would have the financial capacity to absorb any large unexpected costs and could mitigate them by missing a few payments to myself.

I looked at the loan option recently and decided against it due to the reasons mentioned above.

Buying a car outright for cash, getting a loan, leasing, using PCP are all valid options to consider each with its own pros and cons and the best option for each individual will vary depending on the personal circumstances of that person. The OP doesn't give enough info in her post to really be able to know what the best option(s) might be for her (not a criticism at all OP!)

My advice would be to consider all options and run each scenario based on your own particular circumstances.

If your aim is to get the bestest shiniest car for a low monthly payment and then continue to get new cars then yes, PCP makes sense. If you want a low cost option over the long term and don't want to continually change cars, WHICH IS WHAT THE OP WAS ACTUALLY ASKING ABOUT, then PCP is daft.

You clearly haven't read what I said.

Even if you DON'T want to continually change cars it can be CHEAPER to buy a new car on PCP and then KEEP THAT CAR forever than it is to pay cash for it.

You seemingly don't understand that PCP does not = constantly having to change your car every 3 years. You can have a car on PCP, pay the finance off and keep it. It is NOT the same as leasing a car.

And NO for the last time, I don't work in the car industry or anything you do with cars, finance, shiny things or anything else remotely related.

I'm done here.

What I would like to know is what happens if you lose your job or crash the car?

Can you hand back early without penalty?

Do pcp come with insurance to pay off pcp in a crash situation?

Personally I buy in cash. Mainly because I don't want another overhead, also happy to keep car for a long time. I'm also the type to stress about the upcoming balloon payment.

OP in the words of Getty ‘if it appreciates buy it, if it depreciates, lease it.’

Who do you think is more likely to profit from car leasing and PCP schemes?

(1)The manufacturers (massive, sophisticated multinationals), the dealers (not known for disadvantaging themselves financially) and the finance houses (ditto), or

(2) the poor saps leasing the cars or paying for them via a PCP arrangement?

Think hard about your answer. Which side of the fence do you think that John Paul Getty would be on if he were alive today?

Make no mistake: anybody leasing a car or participating in a PCP arrangement will end up covering the cost of the depreciation. Do you seriously believe that the corporate counterparties will do this for you as a gift so that you can drive around in a shiny new car and not worry about holding a depreciating asset?

I wouldn't want the commitment of a PCP. I'd rather take a loan out if I couldn't afford a car upfront. At least then I guess if I lost my job/needed cash I could sell the car and pay the loan off. Always paid cash anyway.

We have a lease agreement, because my DH wanted a 48K car. Now whether or not most people think having a car that costs that much is ridiculous, when a £1000 car would also drive from A to B isn't the point.

Just like some people spend 1000s on handbags, or shoes, he wanted it, and the leasing is the most affordable way to have a brand new shiney expensive car.

It is a commitment, but so too are loads of other things. The bank doesn't stop wanting your mortgage payment, or a loan payment if you lose your job. Your mobile company won't let you out your contract, and the electricity and gas people won't let you off if your a bit skint.

Think of it as simply as this; if the shit hits the fan and you say loosw your job and need a few grand you can sell a car that you own and keep the moneyor quixjly pay off thw bank loan. If the shit hits the fan and you are in pcp you will generate debt for yourself keeping up the repayments on an asset that you neither own or can afford.

Wiltingfast, you can voluntarily terminate a finance agreement once you have repaid 50% of the finance amount so whether you can terminate without penalty when you lose your job will depend on the individual position. Otherwise it will remain a financial commitment like all others and you would need to continue to pay it or come to an arrangement with the finance company.

You can purchase a product called GAP insurance to cover the difference between the insurance pay out and the outstanding finance amount.

I in no way think PCP is some holy grail of car ownership with no downsides but there does seem to be this slight attitude from some that anyone who uses it is some feckless idiot who, if they just thought about it a bit more, would realise they are being a showy idiot and use their savings to buy a nice sensible run around for cash.

PCP is a sensible, cost effective option for certain people in certain circumstances.

Nettle have you read the full thread? There are plenty of examples where it makes financial sense to lease.
I am very happy leasing my car, the monthly price is less than the depreciation cost compared to if I bought it new, and I don't have to worry about repairs or road tax.
I am definitely not a poor sap, as you put it!

And for the sake of arguement my DH and I have 2 cars, one 8 years old we own outright, and a 17 plate lease car.

I've done both & there are pluses and minuses on both sides. I'm currently on a fixed two year lease on a new car, with no option to buy at the end and it is costing me £3.8k all in, plus one car service and insurance.

I've also bought multiple second hand cars & it has been a lottery. Some of them have been great & I've no problems - others have been a nightmare and I've spent more on fixing them than they've been worth.

The downside of leasing to me is the endless anxiety of keeping the car in good condition and not getting it scratched or marked. The upside is that I've been driving a new car for the last two years for £3.8k and I don't have to worry about it going wrong, depreciation etc.

The downside of buying second hand is that it is a bit stressful ensuring you get a decent car & you are not ripped off and you are responsible for everything thereafter, plus at some point you will have to sell it. The upside is that I worry less about minor marks and wear and tear & when you get a really good one, they do work out cheaper long term.

I'd lease again for sure!

I've read you can't add a tow bar to a pcp car, is that right?

It's absolutely stunning to see how many people don't understand how finance deals work.

Make no mistake: anybody leasing a car or participating in a PCP arrangement will end up covering the cost of the depreciation. Do you seriously believe that the corporate counterparties will do this for you as a gift so that you can drive around in a shiny new car and not worry about holding a depreciating asset?

I like the irony of the 'Make no mistake...' whist making a huge mistake in assuming that all lease and PCP deals are worse than buying outright.

There are many, many, many examples of where you can lease a particular car and keep it for 2-3 years for a fraction of the depreciation you'd suffer if you bought it.

Recent one (past year or so) that spring to mind:

VW Passat Alltrack with high spec (auto, sat nav, leather, etc). £32k to buy but there was a lease deal at £119.99 per month for 2 years.

Total cost £3,120 over 2 years

Do you really think that's not less than the depreciation?

Well I can tell you they go for around £23k at 2 years old.

Other ones I can think of were a new shape Audi A4 at £140/month and an Audi S8 at £480 per month (nearly £100,000 to buy).

You just need to be very vigilant and persistent to find the deals, then jump on them very quickly as there will be limited numbers.

Because I know someone will ask (again) NO I don't have any vested interest in buying/selling cars, I just very much like cars and always look out for the best deals, whether lease, PCP, cash, HP, whatever

I think if you really want a brand new car then maybe pcp is as cost effective.

If you're happy with a 2-3 year old car then I don't think it is as they won't depreciate as much. I always get a car about 3 years old and keep it until it dies.

Current one is now 8 years old, I've had it serviced once, dh has done a few oil/filter changes on it and it's had new tyres. So I've spent about £450 on it in 5 years, plus £30 a year mot and £35 a year tax.

It cost me 9k and had 8000 miles on the clock. Brand new it would have been about 17k I think.....Ford Focus. So for me it's been a total winner.

shelley I'm a fan of leasing but I expect the figures you quote need a deposit too, so not entirely accurate?

The average car loses 50 to 60 percent of new cost after 3years at 10k miles per year.
The initial deposit and monthly pcp payments cover this cost.
Arguably you are paying the worst of the depreciation, then doing it all again when the deal is up. Incidentally in only around 20 percent of pcp deals does the consumer pay the final lump sum and keep the car.

PCP gets you an upfront discount from the dealer. Often a VERY hefty discount.

Buy on PCP, pay it off immediately, take the discount, why buy with cash/loan/finance and pay more?

I thought you were leaving the thread Shelly?

You think that if you tipped up at a dealership with cash, they wouldn't give you a discount off list price?

Also, ask yourself why dealers are giving generous discounts on list price when you embark on a PCP arrangement. Is it through kindness? Or is it because they make enough commission on the arrangement (ultimately paid by the customer) to make it worth their while? You decide.

Some deals for new small cars include the car, service, emergency cars, and insurance for about 100/mth. One of those deals means you probably never need to buy your own car again.

I've never managed to negotiate a cash discount, you maybe would at a small one man type dealer but the bigger dealers push you big time into taking finance of some description.

I work in this sector - as a result I can't give my opinion - however there is a LOT of bad/downright incorrect advice on this thread.