Lease or Buy

[Rory]

Here is a bit of advice that i have followed all my life, if i cant pay cash then i wont get it. the only thing i have ever paid a loan for is my mortgage.

The problem with that approach is that new car sales would be decimated which obviously be a disaster at the best of times. Right now it would probably wipe out the entire auto-industry. So they have to come up with ways for people to be able to acquire new cars when they can't really afford them.

PCP is one of those ways. I have absolutely no problem with people using PCP - as I said earlier, individuals can't change the world and you should do whatever suits you best. But PCPs help support articficially high list prices on new cars and so work against people who, like you and me, would rather just pay cash.

 

[Rory]

And your point is ???

You're now the only person in this thread who doesn't understand what you've done. Life must be wonderful in blissful innocence of Thumper World.

 

[hawk20]

Thumper, you are wrong, I'm afraid (just about the interest on the GFV). You have been right about much else.

You were right that the higher the GFV the less the payments will be. With HP you buy the whole car (inc the GFV value if you like)
With PCP you are paying for depreciation only down to the GFV value.
Plus interest on the capital tied up in the car. And that includes interest on all the car's value (inc the GFV). I have set this out on a spreadsheet many times and proved the point.

Those who argue we should all buy cars for cash are being neither logical nor sensible IMO. We all buy houses with a mortgage and there is no reason not to buy cars in a similar way. They last for 10 years or so -or more in some cases- and using extended finance is no differenct in principle or in logic than doing so for a house.

Most folk are more than happy for some people to choose to rent a house as their main home or for holidays. They should be equally happy for people to rent a car either on contract hire or with a PCP (which is really just contract hire with an option to purchase and a slim chance of having some equity above the GFV).

 

[*Thumper]

Paying cash .... nowt wrong with that, if it makes you comfortable ........ this was my original idea ............

There must be around 7-8 different ways to buy a vehicle ............. the original poster asked which is best, lease or buy ??

Well the answer my dear old fruit, is ........... whatever is best for you !!

If we were all the same, we'd all drive ............. (insert whichever car you wish)

And there lies the next problem .............. we would'nt agree on that either !!

I'm very happy with my car, deal, and then subsequent finace option.............. it was an option............. not a compultion.

There's been a lot of muddy water written above .............. not all true .... but certainly not all incorrect .............. it goes to show, that the market can be complex .......... why ? because we all have different wants desires and needs.

If I could be arsed to write a post, showing all the options, and the cost benefits to each .................

I'd have to charge you ................. lol

 

[television]

Paying cash .... nowt wrong with that, if it makes you comfortable ........ this was my original idea ............

There must be around 7-8 different ways to buy a vehicle ............. the original poster asked which is best, lease or buy ??

Well the answer my dear old fruit, is ........... whatever is best for you !!

If we were all the same, we'd all drive ............. (insert whichever car you wish)

And there lies the next problem .............. we would'nt agree on that either !!

I'm very happy with my car, deal, and then subsequent finace option.............. it was an option............. not a compultion.

There's been a lot of muddy water written above .............. not all true .... but certainly not all incorrect .............. it goes to show, that the market can be complex .......... why ? because we all have different wants desires and needs.

If I could be arsed to write a post, showing all the options, and the cost benefits to each .................

I'd have to charge you ................. lol

I have never bought one thing in my life on HP, never leased also, had no mortgage for 38 years,,so yes we are all different

 

[hawk20]

Lucky indeed -and few in number- are they who can afford to buy their house and their car without some form of financing.

 

[television]

Lucky indeed -and few in number- are they who can afford to buy their house and their car without some form of financing.

It depends on how you look at it, if I wanted a car, I bough a super car in bad condition and fixed it,used it for a while and sold it making money out of it.

I have bought a house with no roof or windows for almost nothing, re built it,did it all on a grant for a listed building, lived in it for a while and sold for a huge profit.

It did not work with the wives

 

[Alex M Grieve]

It did not work with the wives

All depends on the mileage you put on them Malcolm, and whether the servicing was according to the manufacturer's recommendations?

You have demonstrated in other threads that you have exceptional skills on cosmetic repairs to bodywork, so we'll take that as a given. Must have been the FMWSH that let you down?

 

[spock500]

I am looking to lease purely to reduce my tax bill, in the past I have always purchased cars outright then serviced them myself.

This at the moment is not a good strategy so looking for the most tax efficient way to purchase a vehicle, the lease plan if I am correct is a 100% deductible.

My other option was to go for traditional HP on a second hand monster (CLS500) which may or may not runaway with itself on maintenance costs.

This site caught my eye for some very good offers;

http://www.contracthireandleasing.com/

Any advice appreciated,

 

[jberks]

All I could say is speak to an accountant. It may be a better option but it equally could be a worse one. All depends on a wide range of issues, requiring personal details that I'm sure you wouldn't want to share with the rest of us.

 

[spock500]

All I could say is speak to an accountant. It may be a better option but it equally could be a worse one. All depends on a wide range of issues, requiring personal details that I'm sure you wouldn't want to share with the rest of us.

I was hoping to maybe lure one out of the woodwork on here, my situation is fairly straightforward.

Basically self employed with minimal outgoings to offset against income, at the moment I file my own returns but now my frugal approach to owning a vehicle is not working for me.

If I thought the whole value of a car purchase could be offset on one financial year I would just go ahead and buy the vehicle then deduct it.

Unfortunately your only allowed a proportion of it against leasing where the whole payment is deductable as I understand it.

 

[MBDevotee]

Couple of points:-

Thumper - as a few have pointed out, you are wrong in your assumption that you don't pay interest on the GFV. You DO - but you don't pay the capital back, that's left until the end.

Leasing is tax efficient for Business' so you need to talk to an accountant as it's only beneficial if you are in certain tax positions....

And yes - if you buy a 6 month old one at a good price - it's always going to be cheaper!

 

[hawk20]

Couple of points:-

Thumper - as a few have pointed out, you are wrong in your assumption that you don't pay interest on the GFV. You DO - but you don't pay the capital back, that's left until the end.

And yes - if you buy a 6 month old one at a good price - it's always going to be cheaper!

The payments cover interest on all the capital tied up in the car -including interest on the GFV as you say.

But the payments are also repaying capital. Over the three years of a typical PCP you will pay back all the capital other than the GFV. That is the only bit that remains unpaid at the end.

What a PCP does is charge you interest on capital tired up and the depreciation that occurs while you have the car, with a guarantee that it will not depreciate below the GFV.

Buying a 6 month old car is not always cheaper because the interest rate charged on a PCP on a secondhand car is often much, much higher than on a new car. So if you want finance, sometimes buying new can even beat buying nearly new (also with finance).

 

[drdel]

As an econometrician (sums with money!!) I build financial computer simulation models for exploring purchasing and different financing options.

Believe me as an individual its best to buy it personally, ideally for cash, it will bring you about 12% discount (investment return is only about 4%, before tax - whereas the cost of cash is at least 6.5% (if not 8+!)APR so don't loose the 3 or 4% - don't trust the hype of leasing, HP etc- very, very few salestaff understand the true numbers.

Charge the maximum mileage allowance of HMRC. You'll avoid all hassle of massive paperwork i.e. benefit-in-kind, fuel records, etc etc.

 

[hawk20]

As an econometrician (sums with money!!) I build financial computer simulation models for exploring purchasing and different financing options.

Believe me as an individual its best to buy it personally, ideally for cash, it will bring you about 12% discount (investment return is only about 4%, before tax - whereas the cost of cash is at least 6.5% (if not 8+!)APR so don't loose the 3 or 4% - don't trust the hype of leasing, HP etc- very, very few salestaff understand the true numbers.

Charge the maximum mileage allowance of HMRC. You'll avoid all hassle of massive paperwork i.e. benefit-in-kind, fuel records, etc etc.

It is not valid to make such sweeping statements. Most MB PCP's are at lower APR's than you quote and some firms, sometimes, offer APR's as low as 0% APR.

I have always found with MB cars you can get a good discount, and a dealer contribution, and a low APR often better than many are paying on their business finance, or on their mortgage. Need to think about all these factors before we can say one method is better than another. And there are times when having a guaranteed residual value (the GFV) is well worthwhile. On bigger engined cars the PCP deals have often beaten buying outright for cash.

 

[spock500]

I have been offered the new Audi A6 S available in March on lease, from what I can see it's over £32k but can be leased for £310 per month with three months deposit up front.

10k p/a mileage, hand car back at the end of 36 months.

Road tax included but not sure about servicing/VAT (forgot to ask but full details being sent through tom)