Buy, lease or PCP

All Volvo XC40 related discussions
NitramA
Posts: 110
Joined: Thu Aug 02, 2018 7:22 pm

Post by NitramA »

Following up on the recent post by Dermottdog, rather than highjack his post I thought it best to start a new one.

I find this topic fascinating and have had protracted conversations with my Son about how to financing a car.
He likes to lease whilst I want to pay it off.
His view is that you’re going to get walloped with depreciation so if you buy, all that capital isn’t available to you to invest for (admittedly a small amount) of interest. He likes the cash flow advantages.
I also concede that if you get a Friday afternoon car it should be easier to resolve if you’ve got the weight of a finance house behind you.

My view is that if you lease, or use a PCP you’re forced to make a decision about your car when the finance company decide. I like to buy cash, or at least a short term 0% loan to give me flexibility and choice. Clearly I’m willing to sacrifice the cash flow.
I also only buy what I can afford, but I do seem to be on oddball here.
Before I offend anyone I do understand the difference between having a cash sum available and having sufficient income to service a loan. I’m referring to people who spend a disproportionate part of their income on what is a really a lifestyle statement.

When I picked up my car and transferred the money the Sales Director was very dismissive of me and made me feel quite uncomfortable that I was paying cash. It’s just as well the Salesman I dealt with was more accepting as the Sales Director would have lost a sale if he had been involved at the start.
I do understand that he makes his money on credit, but all the same....


One scam I think I’ve noticed is that the list price of cars have increased way above inflation whilst the PCP payments remain more or less constant. I’ve also noticed the interest rates have gone up. This means the balloon payment is huge, so you’re effectively encouraged to not keep the car but to embark on another PCP term. Once you’re on the gravy train it’s difficult to get off, but that’s another story 😀

So, convince me of the merits of not “owning” a car. 🤔🤔🤔

Dermottdog
Posts: 768
Joined: Sat Jul 06, 2019 7:39 pm
Location: Orpington, Kent

Post by Dermottdog »

NitramA wrote: Tue Jun 09, 2020 9:35 pm Following up on the recent post by Dermottdog, rather than highjack his post I thought it best to start a new one.

I find this topic fascinating and have had protracted conversations with my Son about how to financing a car.
He likes to lease whilst I want to pay it off.
His view is that you’re going to get walloped with depreciation so if you buy, all that capital isn’t available to you to invest for (admittedly a small amount) of interest. He likes the cash flow advantages.
I also concede that if you get a Friday afternoon car it should be easier to resolve if you’ve got the weight of a finance house behind you.

My view is that if you lease, or use a PCP you’re forced to make a decision about your car when the finance company decide. I like to buy cash, or at least a short term 0% loan to give me flexibility and choice. Clearly I’m willing to sacrifice the cash flow.
I also only buy what I can afford, but I do seem to be on oddball here.
Before I offend anyone I do understand the difference between having a cash sum available and having sufficient income to service a loan. I’m referring to people who spend a disproportionate part of their income on what is a really a lifestyle statement.

When I picked up my car and transferred the money the Sales Director was very dismissive of me and made me feel quite uncomfortable that I was paying cash. It’s just as well the Salesman I dealt with was more accepting as the Sales Director would have lost a sale if he had been involved at the start.
I do understand that he makes his money on credit, but all the same....


One scam I think I’ve noticed is that the list price of cars have increased way above inflation whilst the PCP payments remain more or less constant. I’ve also noticed the interest rates have gone up. This means the balloon payment is huge, so you’re effectively encouraged to not keep the car but to embark on another PCP term. Once you’re on the gravy train it’s difficult to get off, but that’s another story 😀

So, convince me of the merits of not “owning” a car. 🤔🤔🤔
The above is very well written and spot on. I’ve had a couple of Golfs on PCP. As you rightly say, it’s difficult to get out of. For me, at the time of starting a family, the balloon payment wasn’t an option. So you can walk away but then have find another car, perhaps a cheaper, lesser car. Not an option either. So we ended up buying another one on PCP, a model further up the food chain. I have no obvious advice but I can tell you that having been there and got the tee shirt, I was never going down the PCP route again.
R Design Pro T5 AWD in Crystal White. Convenience Pack, Front Parking and Apple Car. Couldn’t afford anything else!! Arriving late September 2019.
Deleted User 2663

Post by Deleted User 2663 »

For me it's PCP for a month, then Buy :D

I've only used the PCP option in the past to make use of the dealer or manufacturer cash contribution.

I've been lucky enough to fund my last few cars through a combination of cash/savings and personal loans.

Many manufacturers offer generous cash contributions, often many thousands of pounds, if you take out a PCP finance deal.

So my technique has been to have the money available, but don't use it initially. I've taken out a PCP and obtained the cash contribution of say £2,000 from the dealer/manufacturer.

This is knocked off the price of the car along with the usual negotiated discount. The first installment of the PCP is made, to show willing and to confirm the agreement, then I cancel the PCP and pay the full value of the car using my previously stored money (from savings and or personal loan).

You end up paying literally a few extra pounds of interest for the first installment but you get the benefit of the £2,000 cash contribution.

And the car, except for a brief month when in PCP, is yours as soon as you pay it off after that first month for list price MINUS your negotiated discount MINUS the additional £2,000 contribution.

It's not always £2,000, it varies between £1,000 and perhaps up to £4,000 for certain models, such as Audi's last year.

Unfortunately Volvo weren't giving a cash contribution when I bought my XC40 last year.
blastpipe
Posts: 565
Joined: Tue Aug 28, 2018 9:04 pm
Location: UK

Post by blastpipe »

I much prefer to buy outright and know that it is mine. I have used loans or some other forms of credit in the past but always try to pay it off as soon as possible. Yes there are discounts if you take a dealer finance..again I have done that to achieve that discount and then paid it off quickly afterwards. However I have achieved better discounts by using corporate discounts deals with the likes of the Caravan club..including on the XC40..and about 16% off on our other car.

List prices annoy me..whether when I had a company car for a bit and the HMRC handling of those or now due to the nasty £40k threshold and road tax etc.

With regards to depreciation that is always paid whether you're a cash buyer or on PCP...it is part of the cost of ownership and in the monthly payments. The car does depreciate and it isn't going to be the finance house taking on that cost is it?

I say use what you feel is best for you...we're all different, with different incomes, priorities and desires.... do what you feel comfortable with.
T4 Auto AWD R Design March 2019
squint
Posts: 185
Joined: Tue Mar 31, 2020 9:55 pm

Post by squint »

Totally agree with all the above.
Another consideration is how long you intend to keep the car for.
I had my previous car for 8 years - someone in a similar PCP finance would either have to pay the settlement figure - about £15K - depending on cost and time period - or take out another finance to pay the settlement figure to keep the car.

Oh, and I can assure you, having a Friday afternoon car - or in my case - a very boozy Thursday breakfast followed by an even boozier lunch followed by an all night bender to repeated on the Friday, using PCP and rejecting the car is not very easy - I assume some financiers are better than others.
Regretfully rejected R Design, Glacier Silver, T4 Auto FWD Convenience Pack, Front Park Assist,Power Glass Tilt & Slide,Smartphone Integration,Winter Pack, Mudflaps
gt40
Posts: 116
Joined: Mon Jun 17, 2019 11:23 am

Post by gt40 »

Last eight new cars I've bought have either been full amount paid in cash, PCP at 0% with intention to pay the balance at completion, or a large deposit with 0% on the balance. I've never paid a penny interest.

However, that's because I can and I completely understand the attraction of a good PCP or lease deal to get anyone into a decent car. It can work well for many.
T4 R Design FWD in Thunder Grey, with Intellisafe Pro, Winter & Convenience packs plus a few bits & pieces - arrived Sept '19
Salmonfisher
Posts: 152
Joined: Sat Jan 05, 2019 4:58 pm

Post by Salmonfisher »

Interesting that we are all for buying upfront (I certainly am) and yet the majority of cars are bought on PCP. I hate the hard sell which only convinces me there is so much profit in it for the dealer that it can't be in my interest. I appreciate some people don't have the cash resources but I was happy with second hand cars starting cheap (a £25 old Ford Popular dates me) and slowly working up through better and better ones until eventually nearly new and then new. Apart from anything else owning outright has been a boon in times of reduced income.
gt40
Posts: 116
Joined: Mon Jun 17, 2019 11:23 am

Post by gt40 »

Salmonfisher wrote: Fri Jun 12, 2020 9:11 am Interesting that we are all for buying upfront (I certainly am) and yet the majority of cars are bought on PCP. I hate the hard sell which only convinces me there is so much profit in it for the dealer that it can't be in my interest. I appreciate some people don't have the cash resources but I was happy with second hand cars starting cheap (a £25 old Ford Popular dates me) and slowly working up through better and better ones until eventually nearly new and then new. Apart from anything else owning outright has been a boon in times of reduced income.

I'll see your £25 Popular and raise you a £10 Hillman Imp
T4 R Design FWD in Thunder Grey, with Intellisafe Pro, Winter & Convenience packs plus a few bits & pieces - arrived Sept '19
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Bob
Posts: 295
Joined: Thu Jan 25, 2018 5:14 pm
Location: Lancaster

Post by Bob »

My Ford Pop cost me a tenner!
Ordered 24th February 2018: XC40, FE, T5, Crystal White, Lava Interior (additional black carpets), 19" wheels, mud flaps, Tow Bar, Polestar, was expected June/July, then 1st October.
Finally took delivery on 16th October 2018. 8-)
Salmonfisher
Posts: 152
Joined: Sat Jan 05, 2019 4:58 pm

Post by Salmonfisher »

I was done! Well I was because the clutch was shot, the brakes poor and the rear bumper fell off in Stratford upon Avon High Street!
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