DON'T BE CONNED BUYING A CAR - PCP VS LEASE VS HP VS CASH EXPLAINED.
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- Опубліковано 5 тра 2024
- In a world where car ownership has taken a leasing-centric turn, it's time to face the reality: we're all leasing cars, whether we admit it or not. Very few people on Personal Contract Purchase (PCP) agreements actually end up keeping their vehicles, essentially making it a leasing arrangement. So, in this tell all video, we delve into the realm of car finance options to help you make the best decision for your next car.
Join us in Leasing.com's inaugural School of Motoring episode, where Howard Ritchie sheds light on the various ways to finance your next car. Cash, PCP, Hire Purchase (HP), or Lease - each option is examined with transparency and insight. Ever wondered what a balloon payment is and who actually pays it? Contemplating the wisdom of buying a brand-new car outright with cash? Curious about the pros and cons of a personal loan? Look no further.
While we do hold a soft spot for leasing, we understand that it may not be everyone's cup of tea. Rest assured, this video remains unbiased, presenting Howard Ritchie as he stands, armed with only a whiteboard and a less-than-impressive drawing ability. He simply lays out the facts and clarifies the intricacies of car buying options, ensuring you're well-informed to make the right choice.
So do feel free to comment on what you already knew... whether you're a leasing enthusiast or exploring alternative routes, Howard Ritchie's School of Motoring is here to guide you through the maze of car finance possibilities. Let the knowledge unfold and the whiteboard master enlighten you, one drawing at a time.
Key moments:
00:00 - Introduction
00:30 - How does PCP car finance work?
03:30 - How does leasing (PCH) work?
05:18 - Should you ever buy a new car with cash?
06:52 - How does HP car finance work?
07:15 - PCH vs PCP vs HP summary
Leasing vs PCP with real world examples: bit.ly/3t2hzTC
Five car leasing questions answered: bit.ly/3p8OkO0
How to choose your leasing plan: bit.ly/3v8fCI2
What credit score do you need to lease a car? bit.ly/3heLMJQ - Авто та транспорт
COMMENTS QUIZ: WHICH FORM OF CAR FINANCE ARE YOU ON AND WHY?
HP: Tight on money. However i've just realized it is best to pay the car off within 3 years because in case anything happens to the car (write off) or you. Since you don't own the car until you've paid it off.
I am on a lease, it has cost me £7500 over 3 years on an EV, which would have dropped by £15,000 if I had bought it new 3 years ago and sold it this month
Always lease, why buy,lease,cash or HP it. I can get the best car for the least amount of money. I’ve a M340 touring paying less than £500 a month fully maintained. List price of car new £64k I will have paid £20k for the car over three years. You wouldn’t get that on hp,pcp or cash would I.
No brainer.
Another deal recently Maxus t90 pick up £50k ev truck £139 inc vat inc maintenance 2 yrs. total lease cost £4170 vrs loss of Vat if purchased £8333
Personal bank loan, which isn't attached to the car, so I own the car outright as soon as i get in it. I can sell the car any time and kill the loan, (mostly). Someone else paid for the depreciation, and i can trade in the moment i drive into a dealership and see something else i like.
I can trade in every year just adding a few thou or whatever i have spare, say 5k. You can start with a 10k car on a loan, in 5 yrs you have a 35k car and you own every car you've had for the whole 5 yrs. If stuff turns to shit you can just cash in and all you owe is whatever is left on your original 10k
@@davidkyle5552
Yeah sorry i didn't really explain myself too well. I meant get a bank loan for a car 3-4 yrs old, so the worst of the depreciation was paid for by the previous owner, then trade up every year, car prices in general go up so if you're careful you won't lose much if anything over a year, and if you add a few thou to your pot and buy up each time you'll end up with quite an expensive car that you own outright, but your fixed payments are only to the value of your original loan. That way you've got the choice to stay with cars 3-4 yrs old or make the choice to take a depreciation hit and buy newer.
The advantages are that at any given time you have an asset that you own and can liquidate or add value to as it suits you. You also get to go shopping for cars every year, which if you're a petrolhead like me is great, and the neighbours think you're minted because you've always got a different car (if that's your thing).
The EV thing will change everything though, because it will be all about battery life, which equates more to mileage and less about age.
If what's important is the number on your license plate and not value for money, you're screwed and will be caught in the depreciation/never owning your car trap unless you have a company car.
When I was a kid in the 70s, if I saw a fella in a merc, Rover or a Granada I'd think wow he's got a few bob...there goes success.
Nowadays if I see someone in a new Merc or Range Rover, I simply think there goes someone up to their necks in debt without a pot to P*** in.
Yeah, I remember those days. My Dad's boss had a granada and we all thought it was mega fancy.
TBH, it was the same in the 90s. The proliferation of expensive cars being driven by the masses seemed to begin following the global crash, ironically.
I heard a stat the other day that said 80% of Britons have less than £500 in their bank accounts. If that's even half true then one look at our roads tells you where all the money is going.
You and me both -
🤣
Some people only live for today as one day it will be your last, your only here once so to speak.
I used to think it was crazy for people to want to buy new cars but now I think it's great. I've finally recognised that if people didn't buy new stuff and get bored with it, I wouldn't be able to buy the same thing for half the price three years later. Keep buying new stuff, you're doing a great job :-)
Could not agree more!!
You don't need people buying these cars. Leave it to the companies, they get huge discounts anyway.
so you're buying
Same with anything electronic. Imho, this year's new technology has only one purpose - to make last year's cheaper.
Now that's how to win at buying cars!
£45,000 for a Golf!! Is it just me, but that's insane.We are being ripped off, royally.
It's not just the Golf, the price of most new cars is insane.
of course. I don't see how British people can afford to keep paying these prices. Everyone, including the country itself, is in so much debt.@@thewalrus6833
Honda civic, good car, but over £35k is crazy.
Definitely not just you. I literally swore the moment he said it!
Yeah. 45,000 for a Golf GTi Clubsport.
It is a lot, but that’s a top model.
When buying a car get this complicated you know for sure there is a con going on.
If you think this is complicated then you’re hopeless
@@caio5987 I always suspected as much. Thanks for your confirmation.
I've never understood why people do any of this. I'm happy drive an older car. Have paid off my mortgage and I am going to retire at 55.
Because they still care about what other people think. Like teenagers. They never grew up.
A lot of people, I suspect, including myself, are fearful of the second hand car or van market, you just don't know what you're buying. Full service history means nothing in my opinion, everyone chasing the cheapest fuel prices generally the inferior supermarket fuel, mileage that's been altered or frozen as the vehicle is driven. In my experience, I'm currently going through this, once the warranty runs out it seems a button is pressed somewhere in some secret location and things start going wrong. I've thrown all sorts of money at my van to keep it going which brings me to another point, garage repairs..... Does anyone truly fix anything these days? Looks like I'm on my third turbo in less than two years!!! Yes it gets replaced but why's it happening? No one is interested and that's the stock that's being moved around in the second hand market, hence the success of the deals that are no more than the length of a warranty
@@straty5598
That's a valid point and one that I've heard many say about their own car purchases. Added to that the fact that anything manufactured these days is designed to fail after a few years at most. At the same time manufacturers are claiming to be green and saving the planet. It just doesn't add up.
I would love a newer car but it's not in my budget at the moment and newer cars are very poor quality with unnecessary complications that nobody wants or needs.
@@54356776 You're right, the newer vehicles are overcomplicated, not sure why it's necessary to over engineer something that's done a good job previously, likely, as you say, to meet the green targets. Nothing green about millions of cars and vans going in and out of garages for repairs. Yeah it keeps the world turning but it's an expensive necessity, in my case anyway... That's just cars and vans nevermind TV's, central heating boilers, washing machines, the list goes on
Nice being a boomer i guess
Want to save money on driving. But a Toyota or Lexus new or used. Keep it until 250,000 miles then repeat. Compared to your clever neighbour who has been through five leases, PCPs or whatever in the same period, you will have saved a mint.
I have had 2 used cars in the last 9 years
One depreciated 3k the other 4 K
So I lost 7 k in depreciation
My work mate has leased 3 cars in the last 9 years ,( each car a 3 year lease deal ) and his average monthly payment was around £300 a month
So he has spent £32,000 in the last 9 years and now doesn't have a car lol
Madness
Totally agree! You sound like you come from Africa! All Africans love Toyota... Owned Toyotas ever since I could buy my own car. Never regretted it!
so true. my brother has my dad's old Corolla. The thing just refuses to die
I have a 2011 Toyota with 92k on it. It's all paid for and reliable. I think about getting something newer but newer cars are more complex and there's too many electronics to go wrong.
@@6581punkand they are trackable via electronic senders
Strikes me, the bottom line is people wanting new cars they can't necessarily afford. People seem to be infatuated with cars nowadays. Most bizarre.
It's the image cult.
Totally agree... It's all show. I earn a good salary, but I bought two small cars that actually fit into my garage. That was the most important thing. None of this scraping the ice off my windscreen!
Consumerism...
Why is it bizarre. What’s wrong with someone wanting a new car?
There’s some very strange viewpoints on here.
@@senseofthecommonmanWhy does something being bizarre mean it was wrong?
Only driven an old car. I often consider getting a newer car on PCP, but can never justify the extra monthly spend. I think I’ll run my current car into the ground first
I'm still running my 2004 MG ZS from new! Not sure for how much longer hence being on this video, but go me and my ZS!
Running a car into the ground is expensive too.
@@mike9696that’s awesome! Hats off to you and your baby
@@MisoAntrovery very true. I’m paying easy £600+ on my service each year. Did the math though and this still works out cheaper when factoring in my desires from a car
@@MisoAntro it's much cheaper than a new one at the moment given the purchase/finance costs and touch wood, it's not costing me much in repairs. Breakers yards have lots of Rovers :)
The problem with leasing is they are hard to get out off if your circumstances change, they will both cost heavily if this is needed. Where selling a car you already own even if you had a bank loan for it is much easier.
Car prices have been artificially inflated over recent years to get everyone onto PCP, 45k for a Golf is a joke.
45k for a Golf is ridiculous but then absorbing all that depreciation in the first 3 years and handing it back is about as sensible as wearing a down jacket in 45°c.
Agreed. We're probably the only country who pays this much for this car. It's totally ridiculous. Calling it a Club Sport doesn't add value. It is after all, just a Golf. Original GTI's were best, and affordable. Car prices have gone totally nuts in the UK
Cheapest Golf here is over €37k. 95BHP 1.0l
@@asphalthedgehog6580 Wow. 37k? 1.0L. Whaaaaat!
all overpriced rust buckets . Main dealers will never go out of bizz .
That's because a majority of the country are sheep
I paid outright for a 9 year old Jaguar XJ portfolio 3.0ltr supercharged with only 16,000 miles on it and one owner that had been serviced every 2000 miles.
Original bill of sale in 2012 said £67,500. I paid £19,000. It was like a brand new car.
19k for a 2012 jag, that seems like a lot. Probably get 5k as a p/x
@@senseofthecommonman it's not a diesel. The petrols command a premium.
19k ? You got steamed . £3k no one wants those bid engines
Ignore the trolls, that is an emminently sensible purchase and a lovely car. If someone else is prepared to shoulder up the deprecation good on them.
@Gorbyrev I agree. I don't know where these people are looking but you couldn't pick up a car like that, with the mileage and history it had for £3000. You can barely pick up a Toyota Yaris for that. There's always people that want luxury executive cars and the petrols are in demand because of low emissions zones.
Cash, for a 2.5 / 3 year old car. You'll be richer at the end of the day.
Reacher not always mean happier. Not everything sold for money.
Yes to used car, loan rather than cash
I bought my first car from auction for £110, second from a neighbour for £10 (written off), third from an ex school teacher for £1100 and fourth from a family friend for £1200 and its still going 12 years later! That spans 20 years and £2420. While everyone i knew had nice cars and debt, I saved for a house deposit. More than one way to skin a cat! (Whatever that means)
Buy the best car you can afford for cash after it has stopped depreciation so badly. That way you have one less bill each month so less stress and will enjoy your life more... simple👍🏾
Good video. I think you should mention cash via a bank loan/private loan though. It has advantages and flexibility and can cost less overall than dealer financing.
You beat me to it. Unsecured personal loans from a bank are often the cheapest alternative AND the car is yours at the end, to either keep running or use as a deposit 👍
Totally agree, a secure loan is nearly always a much better interest rate and therefore cheaper monthly payments, plus more flexibility on the duration of the loan
This !! I applied for a bank loan and instantly got approved. Then used it to buy a used 2020 Peugeot 3008. I told the dealer that I’m going to buy it cash but he kep on persuading me to go finance. When I did the math the interest on car finance is way higher so is the monthly payment around £300. Now I’m paying only £200 a month to the bank plus I get to own the car and not tied up to the dealer.
@@fissshhI've been doing this for 20 years! I typically buy a 3 year old car (which still feels new to me) which has lost a huge amount of its value (17k vs 33k for my last one) and then use a personal loan to pay it off. Can sell the car any time I like and just repay the loan, and i usually have years and years and years when i pay no finance at all before the car needs replaced
Yes I thought about this as well. I guess the only issue with this is, if you have other assets and can no longer afford to pay the loan for whatever reason. They can come and take anything to repay. Whereas a secured loan, they will only take the car (I think).
Our family has always brought brand new because we only do low mileage and driven them till they drop 20+ years. Getting everything out of it. My mums car is 25 years old and done 23,000 miles from new. My van is 8 year old and just done 22,000. Deprecation doesn’t matter if you’re planning to keep it 20 years.
bought not brought are you from the crewe area ??
ALWAYS buy a second hand car you can afford, and NEVER lease. Ever.
When I was broke I used to buy second hand and had a world of problems every time. I eventually PCP cars that were a year old, paid it off and keep driving for a few more years before selling. Never had to do anything besides change the tyres and the occasional break pads. Depends on your income.
@@RevealedFilmsexactly, buy a car 6 months old, have all the reliability and warranty value out of it and pay it off at the end. Leasing is a never ending cost per month, along with all the general costs of running a car you’d have anyway. This idea of a depreciating asset makes me laugh, if you spend all your life paying for leased cars, you’ve never had value out of the car. I bought my car for £26,000, 6k miles, after 4 years I paid it off, the value at the time was £22,300. This car, a 19 plate golf GTI mk7.5, will last me for years. I now have no monthly payment so I can save more. I don’t see the point in leasing as an individual unless you’re well off and that monthly payment doesn’t impact your disposable income. If ever I want to sell the car, it’ll have value that will go back in my pocket, further increasing the value I get out of it.
Got to love this video said the quiet bit out loud, the clever people don't buy new cars 🤣
But clever people earn lots of money so they can afford to buy new cars.
Or you can be clever and keep your new car for longer. Good for the environment and your pocket.
Clever people get the biggest discounts on new cars 😂
If you buy new keep it,nissan navara 2008 485k still going
Love you! ❤️ (Friend for life!)
i buy all my cars cash. never ever lease or buy a car on Hp.
we got 3 new cars all paid in cash. 8% interest here now on cars. 8% on a deprectiating asset is clinical insanity
Invest the cash into cash flowing assets and use the cash flow to buy the car.
Yes and you've still got your cash at the end. @craigbeesley9601
@craigbeesley9601 with guaranteed over 8% returns? While there's returns higher than that it'd be a gamble.
If you have the cash, buy it. If you don't, don't.
Don't borrow inorder to invest, might as well get a leveraged loan and stick it on the market.
its not an asset
You're the smart guy
Buy it new is best strategy
These schemes are for those who can't afford it
That's the main problem of everyone who is talking g about pcp. Nobody will ever tell you the secret until its too late: when your pcp is ending you can sell your car to any dealer (like for example Arnold C.) then call to your lease provider (bank) and tell them that you want to pay balloon. Its almost guaranteed (depends of condition of your car) that dealer will pay more than balloon so at the end you will have few grands extra in the pocket. I got that information from my dealer day after I gave back my car to lease provider and I lost about 3500£.
Except you don't have more money. You've paid for years the monthly cost and at the end you have no vehicle. Youre down either way
@nevermind824 That's true. Same story with renting a house. Many people have opinion that it's better than mortgage because you can change location whenever you want and there's practically no maintenance costs compared to mortgage, but after years of renting, you will end with nothing and nobody will convince me that "you can save the difference between both" especially in these days.
That 3.5 k would of been off your previous monthly payments so would of reduced the money you paid out.
@DavidSmith-ls1mv unfortunately not. Balloon is a difference between whole amount of a credit and sum of monthly payments. So when you sign it you agree that will be "predicted future value" of this particular car with mileage on which you agreed and good condition. Bank doesn't care if you will keep it your air conditioned garage and make no milage or it will be heavy usage in workplace with millions of miles per year. If at the end of contract valuation made by single man from this bank is lower than Balloon then you have to pay the difference but if market says its higher then you will get nothing until you sell it by yourself to a person who wants to give more than Balloon. Of course if bank take back that car they gonna sell it for higher price than Balloon or lease it again and earn even more
Wait a second so you say you can pay balloon to make it officially yours but the dealer will buy it for more than youpayed in the balloon?
I bought my Tesla M3P for cash £53000 but I had £3500 back from the Government so it cost me £49500. I’ve had it 4 years and 5 months, and it’s now worth £25000. But if I had it on A lease it would have been £500 down and £1000 a month, which means I would have paid £53500 and not owned it, so I would be £25000 out of pocket
Tesla is a completely different entity and has its own economic system and they also charge 9% interest at the moment. So you have saved interest, it's not as much to do with the finance model surely? Naturally the 100% relief on tax is also a good move on your part. When your car sells, post back what it went for. 99% of cars do not however have that 100% tax relief on the whole purchase in the first year, so if people want to drive they have limited choices. Either way - anyone paying anything for cash over PCP will always win, because there is no interest, there is also no interest on a lease. Cars that are hard to shift or devalue fast are going to be very expensive on both PCP and Lease and especially when there is fever pitch demand for them. M3P are currently £200-£300 less per month than 4 years ago. So the notion of your paying cash here is the point. Same with a house vs mortgage - have you seen how much a house really costs when you add the interest? Thanks for the reference example.
@@leasingdotcom where does he say he got tax relief in the first year? That was just the government electric vehicle rebate at the time. His point is that if the leasing company misjudge the depreciation when they work out the lease cost, it can cost you a fortune. In this case around £26000! The lease cost assumes a rate of depreciation. Anyone who took out a lease on a new car in the 2018-2021 period got properly screwed.
That’s the beauty of electric cars they are so cheap to own and run😂😂
It's the future 😂😂😂 @@senseofthecommonman
Yes, this. This is what happens in reality. Nothing like what the guy in this video describes, which is misleading, imho
Very helpful thank you. I've always wondered about that 'balloon' payment and never really understood it and now everything makes sense. It's very clever marketing. The car company over prices their vehicles so people that want to buy out right pay an excess, whereas the majority of us finance and therefore the brand gets a steady flow of cash and the customer is locked in to the brand meaning the cash flow will continue into the future. This isn't new to most people but if definitely is to me!
I got a new car on PCP three years ago with 0% APR and a good deposit contribution from
the finance company. It’s been a gem so I’ve decided to keep it until ready to go electric in the future. The price I paid was much better than the cash price so it can be beneficial and there is no way I could find a car this well looked after at 3 years.
Some cash buyers take out a PCP in order to get the deposit contribution then end it after minimum term e.g. 1 month so they have effectively bought it for cash but with the added discount.
New PCPs are really expensive due to increase in vehicle costs and higher rates of APR. I suspect the days or cheap or reasonable car finance are over.
Ah, that’s a good trick to know. Thank you!
@@kieranchamberlain9833 welcome 👍🏻
Excellent, concise and clear. The car you drew is a Mercedes S Class. 😄
Informative and hilarious, great job
Regarding the PCP "Balloon" payment - they almost always claim the car is not in the expected condition if you decide not to buy, leaving you with thousands more to pay, (dirty trick number 1 ) OR - you lose the accumulated "discount" on the vehicle you want next (dirty trick number 2 ).
PS, Please stop saying "Haitch", it's pronounced "Aitch".
I’ve had four pcp vehicles and this has never happened to me. The last one was valued higher then predicted so I got a small amount of money back.
That's good news, maybe they're getting better then, I hope so.@@pipipip815
Yep. Nonsense. I bought a new jeep renegade from Arnold Clark in 2021 on pcp. £269 deposit and £269 per month on a 4 year term. Sold it back to them 12 months later and made £4400. Arnold Clark technically paid me to drive a new car for a year!
Nope, not nonsense, This video has 297,000 views. Your positive comment is one of precisely two ! Two positive comments from 297,000 views ?
You think you're in the majority ? Nonsense.@@MS-pi5qb
we own our house outright.
paid it off in 10 years flat.
i have never bought a car on hp or leased one.
all my cars are cheap cars and i buy them with cash. having no mortgage is the key. no rent. nothing. cash pouring in so buying a new car outright is childs play
i'm just a normal working class fella btw.
anyone that has a mortgage or pays rent should not be getting ANY car on finance or lease. concentrate all your cash into paying off your home first.
once you've done that then u can buy a nice car easily.
When i grow up I wanna be like you.
Do I fuck , what a condescending twat.
You are so right on this, we have 2 cars & 1 motorbike, owned for 14, 7 & 16 years, one car bought with a bank loan & the others cash. My mortgage is on target to be paid off 9 years earlier than the term.
My brother luckily bought his house in 97 before house prices rocketed, but has had 7 new cars, bought & leased over 20 years, but have only managed to pay off £20k on their house in 20 years!
Isaachunt
You sound just like me
And I can't understand at all why everyone I know has Cara on pcp ,moratges and zero savings ¡!!!!
@@boyasaka , my brother & sister in law had 7 new cars in 20 years, but only managed to pay off £20k on their mortgage, now splitting up & having to start again with a £200k mortgage at 50 years old, idiots.
Surely if you have the money (and don't need to rely on credit - which has the added cost of interest), the cheapest option is an outright purchase - and then ru the car for as long as possible. depreciation is only really an issue of you sell the car after a few years' of ownership - where you lose the most money. If you have the car for 15 years, years 6-15 are pretty painless in terms of depreciation!
Of course, if everyone wants to drive a car that is only a couple of years old, they have to pay for that privilege somehow. But that's what makes owning a car so expensive - and why people need to come up with ever more inventive ways to convince themselves that they can afford it!
Exactly
Fantastic content, really enjoyed this
Fantastic video. Simplifying something so seemingly complicated
The terms of PCP etc have always put me off where they state things like “maximum mileage”.
Thanks, today i have finallyunderstood the difference between these. And it came roght on time when someone was going to try sell me a PCH car as though it was a PCP! Saved me from making the mistake! Thank you.
Here’s what I do.
Bank loan for about half the cost of vehicle (lowest interest and not tied to car).
25% cash and 25% from trading in your previous vehicle.
The vehicle you buy is typically 2 to 3 years old with around 10 to 20k miles on the clock and approved used. That way you can negotiate and extra year’s warranty. If you can’t then walk away. But some offer two years anyway. In my opinion and experience dealer warranties are the only ones worth having.
Keep the vehicle 3 to 4 years but pay your loan over 4 to 5 years ( to keep monthly payments low).
Then repeat.
Avoid HP and PCPs and leasing as you will pay through the nose.
PCPs are a rip-off. Your interest includes the balloon payment and then should you decide to buy at the end, you’ll pay interest again when you refinance. No way.
My method isn’t perfect but it finds the sweet spot of having a nearly new low mileage vehicle with dealership warranty at the best price.
Job done.
Leasing is almost always a lot cheaper than a PCP on the same car because leasing deals include fleet volume discounts. PCP is a retail consumer product where an individual consumer buys one car, pays interest on the amount financed and does not qualify for fleet discounts. Another big difference is that a car lease is a long term rental agreement whereas a PCP is a credit agreement - hence a deposit rather than initial rental. 90% of people don’t actually pay the balloon payment and keep the car at the end (why would you even if you had the money?) so have therefore effectively leased the car anyway, but almost certainly paid more / higher payments on a PCP than if they had just leased. Also, most don’t realise that the guaranteed future value / balloon payment to buy the car is actually an interest bearing loan that sits on your credit file until paid or the car returned. That could restrict your mortgage lending ability. As for HP that will after PCP definitely be the highest monthly payment. Unless you definitely plan to own the car for a long time and are happy with older car running costs and issues I can’t see the appeal. What’s the car market going to be like in 4 years time or by 2030?
So what would you say is the best thing to do if you’re trying to purchase a new car?
@@donsey9588 He answered the question
"older car running costs and issues". You do know we're not living in the 1970's anymore yes!?
In my opinion, most new cars are where the problems lie, how many new cars get called in for warranty work?
PCH is a waste of money, PCP is a scam, and HP is expensive. Buy a cheap old car.
So e people gotta have a new car in case something simple goes wrong and it needs a visit to a garage, the horror!
I bought my car in 2007 for 18000 I still have it and use it with minimum expenses. My cash purchase was good for me because I have been using the same car all this time. I do not focus on the price of the car but on the value I can get from it.
Every time you see someone getting out of the Merc,Audi or BMW first thought is leased and has no money. When i was a lad the thought was, now there goes a rich dude.
90% of buyers use PCP. I always wondered how all these expensive cars are on the road.
Exactly
If it’s a new EV , the only sensible option is PCH.
Under no circumstances should a private motorist buy one cash or finance . Let the lease company take the gamble on future residual values on EVs. My opinion is the values will tank.
I have been leasing for many years. At first I was very resistant to the idea, but I think it’s fantastic.
Granted I’m self-employed and can get the VAT back which does make a significant difference.
I think it’s a fantastic system when you factor in the very significant depreciation of most vehicles.
Now if he spoke about interest too on PCP you'd soon realise that while you don't have to pay the balloon payment you're paying interest on the entire amount all the way through ....
My question is has pch and pcp put the price of cars up for retail customers because the focus is on the affordability of the monthly payment rather than the total price of the car?
Yes
@user-tt6il2up4o but isn't pcp basically cheaper than classic credit but the dealers get their money anyway or they get back the car resel it make more profit or this plus having the chance for getting more money from you by getting you another contract so it basically gives em more customers therefore more money
When I was selling my house a couple turned up to view one day, the first thing they said to me is please don’t look at the car we’re not Slavs to a car, paid me full asking price cash, this has always stuck in my mind as I drive round in my 2006 Kia sorento debit free!
That car you drew is definitely the Hammerhead Eagle iThrust
I bought my first 2 cars with cash and my third with a mix of cash and an interest free credit card. all were old (12 years) but my most recent has low milage and so far seems ok. Once I've paid off the credit card, I own it outright, will have paid no interest and just have to hope the bottom doesn't fall out of it.
Also consider a standard bank loan. If you have a good credit record, you can get up to £25k and at a cheaper interest rate than most car finance deals. Then buy that 3 year old model and run it as long as possible.
Absolutely.
Interesting and informative content🧐 Thank you🚗
What about a personal loan from the bank, not attached to the car? You own the car from the outset, the interest rate is usually much lower, and you're free to trade up or down as it suits you. If you're clever about it you can even trade in and clear the loan whenever it suits you without losing out.
Exactly
Buying anything on finance will end up more expensive. Buy outright with cash with a big discount off official price and keep car for quite a few years will always be cheapest.
Strongly disagree. Last time I bought a car, it was £25k. Cash or PCP. I had the £25k cash. But I was able to get a bank loan for the £25k @2.9% APR over 5 years. So I took out the bank loan and put the £25k into stocks. So far, the 25k in stocks is worth £33k. That increase in stock value is way more than the interest costs of the bank loan. So finance absolutely makes sense, depending on your financial situation
@@JonathanGray_UK that's all well and good put people need to be aware that stocks go down as well as up, so whilst in this case it has worked for you, it may not work for everyone. If you have the cash, I would only take finance if it was either 0% or the interest rate was lower than if you put the same amount into a high interest account
@@filmalive I don't think it's fair to discount stocks based on risk, you can get some pretty low risk stocks and you only lose money in the event you sell when the market is down
I didn't have 7.5k to blow on a used car I'm afraid 😂😂 paying installments was my only option
I agree in most part BUT, unless it's a back street garage, franchised dealers will not knock any money off for cash. They get way more commission from finance deals...
How did we get to a place where a Golf is 45K, utter madness
£500 burner cars are best
Run it for 12 months if it gets knackered get £100 back scrap price then go and get another
The cost of those types of cars has skyrocketed. I bought a Mondeo for £600, used it for 4 years with only minimum maintenance costs. When I looked to replace it for something similar, it was going to set me back about £1700. I don't think the scrappage scheme helped. It took a lot of perfectly good old cars off the road. I opted to buy a low mileage 7 year old car for 9k, and I'll keep it for a long time.
Yeah, it's best when you don't need a car, you clown. With a family and a job you can't afford cars that break down any second. Every time it will cost you days of trouble. Getting rid of the old car, rental car, finding a new car, registration, insurance... A lot of time better to be spent to make money to buy a way better car.
In Spain, the odd thing is depreciation is a very gentle curve which means a new car much more realistic. €20k new, 3 years on with 40k Kms, it's only €3k to €4k cheaper.
Good video, but you also need to explain PCP and HP usually have to pay lots of interest to pay as well which is getting more and more expensive as rates go up…..
This is a fair point thanks, this will be covered.
I purchase and keep the car for at least 10 years. Save for the replacement whilst owning the current car. Last car was a pre reg 2015 Honda CRV new £20k (5k off the new facelift model), 3 years 0% PCP, paid minimum monthly payment, 3 years later paid the outstanding final payment but had 3 years on interest on the final payment before handing it over. Car is still good for another 5 years, may think about another car then. Cars are for going from A-B, they will stuck all your money if you let them, choose a good reliable car, at a price you can afford, keep it until you’ve got the saved money in your hand to get another and you will save thousands to spend on holidays and other stuff that actually makes a difference to your life.
Great advice!
I bought a brand new car in April 2016, at a cost of 32000 cash, a discount at the time of around 3 grand. I still have that car and even WBAC have offered me 15000 for it very recently. Therefore in effect that car has cost me 17000 over nearly 8 years. Not counting running costs which would apply no matter what method I used, but factoring in the loss on my initial outlay due to inflation, that car has cost me less than 2500 per year, and it's still in pristine condition.
Decent used car that’s just going to cost you tires and brakes on a low rate personal loan to tie in with how long you want to keep it. this is the best option because, you own the car, the loan is unsecured, the car will have some most of its depreciation so will have a value when the loan is paid which can be your deposit for the next one.
The problem with EV’s [I own one] are one of insurance and finance. The insurance only covers you for the value of the car at a point in time. Following following an accident a vehicle is a right-off. Insurance does not cover the cost of replacement but the value of the car prior to right-off. Batteries in 2023 declined by 40%, in 2024 the cost is projected to decline a further 40% which is the main value of the car. My car cost £36k two years ago is now worth £15k. The PCP finance requires me to pay the monthly premium and a balloon payment at the end of 4 years, or I can just hand over the car at that point. But if the car is a right off there nothing to hand over, you’re left with that debt. The insurance on my vehicle is now approx £1.2k PA. Large numbers of insurance companies now refuse EV insurance. EV insurance getting higher as demand for EV repairs exceed capacity so these prices are higher than ICE vehicles.
I have the facility to hand the vehicle back now, and owe nothing, do I stay with the vehicle and take the risk and the cost of insurance.😾
I bought an 18month old 2016 1.6crdi Hyundai I30 estate with 17k on the clock about 5yrs ago for £10,000 cash.
It had warranty and cruise control, alloy wheels, air con etc.
I've spent nothing on it apart from oil, tyres, pads and other consumables.
Itss £30 quid a Yr tax.
Its now got 78k on it and doesn't miss a beat and looks fine.
If I run it for another 2yrs and then sell it for 2k it's cost me £1000 per Yr to run a decent reliable car that's not let me down or required any expensive repairs.
I may keep it for longer and the figures will improve but then I may need to spend money on it but I'll keep changing the oil and filters and see how many miles it will do before it starts causing me problems.
The 30quid a year tax band is a real bonus on these cars before they closed that loophole.
The above time figures are approx it might be 6yrs I've had it but the general cost of 1k or less per Yr to own will end up about right, I might end up keeping it for 10yrs 78k miles isn't particularly much.
But it's a Hyundai!
I had my car on hp and its now mine as it been paid in full ,as a footnote i bought a limited edition which in my opinion will increase in value over the time I run it as there is only 1500 of the model available in the uk , buy smart and hopefully you'll earn money in the long term ✌👍
HP via bank loan all day. Usually cheaper apr than any pcp scheme. If you want lower monthly payment just extend the term. You can still trade the car in mid way through the loan as most have low early repayment charges. It literally ticks all the boxes. Cheapest, flexible and easy to understand.
Good little video this
One thing worth considering is the cost of maintaining the car! Some lease deals have these costs built into the deal. I sometimes think this would have been a better route for me, but you are limited by the amount of miles/km you are allowed to do!! My 2014 Renault Grand Scenic costs me 225 euros a month, with a bank loan with a 1000 euro deposit. I have owned it (Santander bank own it...sorry!) for three years, I have two years to go! It has cost me 3,000 euros in maintanance and repairs. We have totally hammered this car and it now has 207,000km on the clock. It is currently worth approximately 5-6000 euros. The prices here in europe are about 30% higher than in the UK. With a lease deal I would have paid an excess mileage per km rate. Last year we did 40000km.....not a problem if you bank loan it! But make sure you have some spare money for repairs!!! I really wish I did not need a car as they take so much of your money!!!!!
2015 I ordered an AUDI S3 for £37,000 deposit/trade in of £12,000 so financed £25,000 over 5 years at approx £500 PM. All paid in 2020 and have not financed another car since as I still have my AUDI with 30,000 miles so far and it's current value is somewhere around £16,000 to £18,000 (for an 8 year old car). Due to the low mileage I can still purchase AUDI Service Plans but so far the maintenance costs have been very good. The car is ULEZ compliant and my only real complaint is trying to get updated maps for the MMI (every time I try AUDI get very evasive). I am very happy with my car and have no intention of changing any time soon. The saving to me of not paying any finance or hire costs for the last 4 years is far better for my mental health and pocket than trying to massage my ego with a new car every 3 years. If I were doing higher mileage then my scenario wouldn't work as well.
30000 in five years in my Xiaomi m365 I had 12000 for two years plus trains milage so I got more milage then you,with 300 pounds in total spent,but Audi is Audi and the insurance cost and fuel forget about having car in Lond😅n.Cheers.
Excellent explanation...
A couple of recent factors to consider:
a. PCP protects you when the car depreciates at a much higher rate than expected. You simply hand the car back instead of paying the final balloon payment, walk away, and then buy it back off the forecourt at the lower market price the day after.
b. Recent articles by Martin Lewis etc. about compensation claims looming (quote - of the same magnitude as PPI). As I understand it, this applies to cases where the dealer could agree an interest rate with the finance company and was incentivised by commission to make this a high rate. Can anyone put any detail on this story - I had a couple of PCP deals over that period, but the interest rate was set in advance by the car manufacturer's finance arm (3.9% in both cases); so are they in scope? I don't believe the dealer had any freedom to vary the rate.
The controversy is about the balloon payment. An unscrupulous dealer could set the mileage for someone doing 15k miles a year at 5k miles a year to artificially increase the balloon. This would give you a false low payment but saddle you with potential mileage charges at the end of the agreement.
3.9% is a cracking finance rate. Doesn’t sound like you have much to complain about.
With any kind of finance, others are making money out of you for a product you do not own.
Cash is king......always.
Cars has become something like a Phone where someone buys a phone paying it monthly, and after the contract is almost up, a new phone comes up and either they sell it off to pay for a new one or trade it in to cut down the cost of the new one.
For HP, the only time to buy a brand new one really is if you are loaded.
Cause cars depreciate in value and it will always do regardless.
Your investment in a brand new car, the money just goes out the window over time.
PCP is like paying for something you will never own.
PCH I guess thay cheaper down payment looks rather juicy.
But I guess if one is an average consumer/customer who just want a daily commute car for work or doing the grocery etc.
The best one I guess is buying a decently priced used car with not so high mileage. With a good track record/reliability in the market. And abundant enough in the wild thay if it broke down there are plenty of spare parts.
Plenty of spares =cheaper parts if you get me.
But yeah, HP brand new? Maybe if I won the Lottery! Or be a son of an oil sheikh.
HP can work if you have either enough deposit or an old car with trade in value. I bought my last two cars on HP partly because I wanted to not be subject to the usual PCP restrictions on things like class of use, mileage or modification.
With any new car purchase, getting at least VRI or RTI GAP insurance is essential. I had a car stolen and the GAP covered the difference in assessed value and original list price (car was two years old), which enabled me to put down a hefty deposit on a new car and get PCP-level HP monthly payments. Silver linings and all that.
Bought cars on finance and I've also run old cars. You are either paying out for repairs with an old car or have the pleasure and reassurance of a reliable new car. I remember the days of trying to replace a carburettor on a vauxhall cavalier minus temperatures outside one cold Christmas eve. Or stranded by the side if the motorway. Likewise don't like monthly payments.
Repairs will never be 500 to 700 pounds every month no way.
It's an interesting presentation. Obviously heavy bias for leasing. All three options have depreciation, with non cash options this is why you pay all that money for years, have car worth 16k car at the end.
Also i like the bit where he says. "Lets not talk about interest". Ah yeah that bit that makes you pay almost double for the car.
I currently drive a car that'll be turning 10 years old around September/October with less than 70k miles currently on it, BUT, I'll likely be trading it in and putting money down on something else that I can either buy outright or do short term HP or even a small bank loan for.
My car was paid off recently, but the fact that the touchscreen has to he used for the heating/AC, I just think it's dangerous and I've not even had the car 2 years yet. When I can reasonably afford to get rid of it, I will be doing.
Have friends whos business is car finance, mainly for top end cars for WAGs & commercial vehicles etc. Quite lucrative albeit also quite volatile. I've just bought cash a 4yr old low mileage FSH car from a dealership for that exact reason. Paid a slight premium but also with the security of dealership warranty and service contract.
Very true,I bought an 8 year old BMW, after 2 years I had to fix the engine due to a trimming chain failure,iam in my 7th year of ownership with no intention to sell and my cost per year since the big bang have been 500 parts, it's got cheap tax and easy on fuel,750 miles to a 60 liter tank, you do the math on what's a better way to own a car,it's now 16 years old and I'll hold it for another 16 years should I live that long😊
You have to take the mileage restriction the maintenance the big stuff like cam belts and when the warranty runs out after 3 years and the brake down cover after 12 months.i leased my vehicle for 4 years and dreading something serious going wrong now it's out of warranty
Then the inspection for any damage
Would not lease again
We drove a ford galaxy for 19 years, kids called it our loser cruiser😂 but since then always had a new car on 4 years lease. Its a monthly payment we can easily budget for and we always take out the servicing and tyres plans. In our opinion leasing is better than handing over a chunk of cash. We always look after the vehicles as if they were our own. We have yet to pay any unwanted damage/dirt costs when handing back. So, in a nutshell, leasing works for us. Hope this good video helps folk make informed decisions in the future.👍
lolol looser cruiser.. that's getting used.
Leasing is crazy.
My last bought expensive car was Porsche 996 at £60k in 2002, waste of money.
We buy our cars we pay cash of max of £20kish, we shop around until someone accepts it, don’t care about brands etc. now both drive Skodas, I keep looking at Range Rover sports and thinking it would be nice, but no way am I spending that kind of cash on a car.
If you lease what happens when you retire and your income drops massively.?
Forgot to add we drive a kia ev and I have been retired for 7, nearly 8 years now. It's all about personal budgetting. Totally agree about not shelling out for expensive brands. Our biggest trips out are to airports at Manchester or Glasgow which the la'al kia handles easily. Getting another next year unless the ev market throws up something better in the same price range. Wife sticks a tenner in a jar each week which covers the initial deposit.😂
Hi cheers for video. So is the cheapest option to buy a 2-3 year old car with low miles good history?
Low miles aren't always the best option. You want a car that's used for driving longer distances. A lot of short distance trips with a cold motor aren't great.
What happens if there is some damage to the car whilst it`s on PCP or PCH.I think I know the answer, but what if the damage is to the battery on an EV which may need replacement?
Great Video thank you
You omitted a little known fact about Hire Purchase, in that Once you half way through the term, You can give the item back and end the the contract and walk away. This goes for anything Domestic Appliances, Capital Equipment Cars etc
I bought a 10 month old Merc C320d a few years ago and sold it a couple of years later losing c.£15k in depreciation. A friend at a leasing company pointed out they have better buying power and I could have had a brand new one for slightly less per month over the period of ownership. I decided to get a c63 on lease for 2 years so I knew exactly how much the fun would cost me and made complete sense rather than risking a load of money being tied up in a high value car with no idea of future value.
You forgot to mention the excess milage payout at the end. Give the car back and have to pay out thousands extra as no real life person drivers less than 6000 miles in 2 years
I have bought new and used but in Europe the depreciation is much, much lower than the UK...
Used prices are much higher than the UK... That's good and bad news for buyers and sellers..
I would say purchase a reliable brand of a well serviced/loved vehicle.. Buy at 3-4 years with a decent warranty ( perhaps original dealership brand) and then look after the vehicle with plenty, good servicing... Buying privately is okay on vehicles still under manufacturer warranty if the seller is pricing the car correctly ( many try to sell at forecourt prices and that is not the way to go)...
Keep the vehicle as long as it is running well but be careful of going past 15 years unless it is becoming a classic or it is hyper reliable..
my question sis imple what did you last use on your last car purchase/acquisition?
Thank you, funny and informative video.
Thanks for the video, you have convinced to stick with "Bangernomics" . My 20 year old Ford Focus is paying me !
Well I bought my brand new car on PCP and bought the car at the end as intended to do that. Plus I never paid 20% tax so was always into a winner
Strongly disagree with the anti-finance brigade. Last time I bought a car, it was £25k. Cash or PCP. I had the £25k cash. But I was able to get a bank loan for the £25k @2.9% APR over 5 years. So I took out the bank loan and put the £25k into stocks. So far, the 25k in stocks is worth £33k. That increase in stock value is way more than the interest costs of the bank loan. So finance absolutely makes sense, depending on your financial situation
You really needed to run through the numbers on all the examples, not just the PCP one. I bought my car cash, and am just into 3.5 years of ownership. As I look after my cars, it will last me at least 10 years without much bother, but I'm hoping to get 20 years out of this one as I bought it nearly new and am looking after it meticulously.
Keeping a car for 20 years will get one hell of expensive in the last 5-10 years...
@@miskatonic6210Only if you skimp on maintenance. People are cheap and stupid and skimp on maintenance. They only work on their car when things fail, they don't do preventative maintenance, like changing a water pump BEFORE it fails, but around the time they usually fail. It's not rocket science to keep a car running for many years.
@@miskatonic6210
I purchased a seat Ibiza brand new in the 1980's, I owned the car for over 20 years, apart from regular servicing the only other items I had to replace were the clutch cable, battery, and a complete exhaust which lasted 19 years.
Motoring in a cost effective way. 1 find a trustworthy garage of engineers and 'repairers' not a stealership. 2 buy a low mileage 2/3/4 year old car. 3 keep 2 forever with servicing and repairs done at 1. Acquiring a new car, by whatever method, is a vanity project and you sure pay dearly for it.
Are interest rates on PCP or leasing fixed for the duration, or adjusted as inflation/interest rates rise (or decline)?
Fixed for the duration of the term in my experience.
If you buy cash and keep the car for a reasonable period then it's way cheaper. My very nice brand new Mazda 6 will cost me a little over £100 per month.
My Hyundai Tucson is 2015. I got it 2016 so a year old 4000 miles done. £17000 vs £29000 new price. Still have it only MOT and usual servicing. Paid it off a long tome ago. Yes i know not very spectacular but does the job with the dogs. Get a good quality car and use it until it fails. The amount of money people waste on cars. But then say they cannot buy a house do waste on rent.
At my golf club my friends occasionally talk about cars, and how much per month they cost. I am the only person in my group who actually owns the car they drive. A good way of saving a lot of money each year. Obviously my car is second hand but it gets me about.
The basics! ….. Yes.
There’s more to car finance, such as.
‘Tri-party agreement’
‘Termination rights 1/2’s & 1/3’s’
‘Payment holidays’ - ‘Loan extensions’
(these will most likely affect your future credit rating).
PCP-Final payment (GMFV , Balloon )
If the market has dropped and you have negative equity, you could just hand the car back. That’s the G = Guaranteed, however (and the finance company won’t tell you this). You could talk/make a lower offer on the final payment (this happened in 2008-9 crash when car values dropped dramatically).
The finance company if you handed back your car GMFV-Balloon of say £10,000 may only get £8,000 by sending it to auction.
They’d also have transport costs & auction fees.
So if you paid let’s say £8750 you’d be saving them hassle and money, but also buying a car below the retail price that you know the history of because it’s your car!
I have a ten-year- old car which I bought new for cash. It has now depreceited to one third of it original value although it's a false third because prices for the same model have increased. It's only done 60k miles and as I'm now elderly and nothing to prove, I'll be keeping it until either it or I go for scrap.
buying with a unsecured personal loan from your bank can also be a great alterantive especially if you have good credit as you can usually get a much lower rate than with a PCP or HP.
I have never understood PCP but I do understand no repayment can cover the depreciation. Most luxury cars lose 50% over 3 years.
A PCP is akin to a 95% mortgage, to get something you could normally never afford. A PCP is also on the understanding that you'll hand the car back for a new car at the end of the initial contract period, unless you really love the car - and have saved enough to pay the balloon payment (difference in initial value and the equity accrued in payments over the initial period). The other alternative is that you refinance the outstanding balance for another term, which is almost always a bad, expensive idea.
It's therefore effectively a zero equity, zero ownership method to drive a far nicer car than you'd normally be able to afford, provided you don't want to keep it and you're happy with the caveats. Some PCP deals include VED and servicing, akin to full leasing agreements, which I think some people like for the simplicity. I would find that quite inflexible though.
The only new cars I've bought were on HP, where each monthly payment was directly paying off the loan from the finance company you effectively take out to own the vehicle. No balloon payments, just a fixed monthly, no mileage or usage limits like are commonplace with PCP.
That worked well for me in the years when we had exceptionally cheap finance (Ford Credit was something like 1.4% HP, 0.9% PCP!).
Nowadays I'd only buy on a personal loan or cash, unless I could get a sub-3% HP offer and was able to put down a generous deposit.
Definitely a 4 series with that air intake grill 😂
My last four cars have been pcp, I don’t hand the back I sell, then pay off the remainder. This leaves more collateral for the next car.
Without people like me who buy new cars, you wouldn’t have old ones to buy.
I always buy low mileage 3 or 4 year old cars and keep them well maintained. I run them until they fall apart, in the past about 10 to 12 years. I suffer negligible depreciation over that time. But i find these days cars are so reliable my 12 year old Nissan shows no sign of failing at all, it might be the last car i ever have to buy.
The quoted depreciation of 20% when you buy a car because of VAT is a
myth. The second hand value of a car is down to supply and demand. Try and buy a Porsche GT car foe list price minus 20%.