Naive question about car finance

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TomCat
Posts: 5
Joined: Fri Apr 16, 2021 11:44 am

Post by TomCat »

Previously, I've only paid cash for cars but am very interested in getting an ID.3 on either PCP or lease because I expect electric car tech to improve rapidly and so would want to upgrade in four years. I'm looking at the 77kWh Tour spec, but also considering a Tesla Model 3 Long Range.

Can anyone help me to understand why VW UK's lease and PCP costs for the Tour are almost identical? In comparison, Tesla's PCP prices are ~20% higher than their lease prices.

Also, how can a Tesla Model 3 Long Range spec with a much higher sticker price only costs slightly more to lease for 4 years than an ID.3 Tour? (~£30k for four years for the ID.3 Tour compared to ~£31k for the Tesla Model 3 Long Range)

I suspect I'm not understanding a fundamental aspect of car financing, so I hope that someone can help me to understand what's going on here!

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nabrU
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Joined: Wed Mar 31, 2021 9:43 pm
Location: Southampton, UK

Post by nabrU »

Hi TomCat,

I have no experience with VW PCP but ID.3 is my third VW car I lease.

I would recommend not looking at official VW website for lease offers as they are not very good. Lease deals tend to fluctuate very much and very good deals tend to last very short period of time.
For example in mid-March there was an offer for some limited numbers of pre-reg '70'-plate cars in Style and Family trim with metallic paints, 19" alloys and heat pump. I consider myself lucky to be able to pick one of them (see my signature) for £343 per month (in 1+23 so for 2 years) with 8000 miles pa. Currently the same car in the same lease profile is minimum £694 per month! And that's with standard paint, no alloys and no heat pump!

Therefore if you are decided to lease you might need to wait a little for a good deal. They tend to appear at the end of quarter or year (selling targets, CO2 penalties etc.). With leasing there is saying 'chase the deal not the car'...
ID.3 Family Pro Performance + Makena Turquoise + 19" 'Andoya" alloys + heat pump I Soft 2.4
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TomCat
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Joined: Fri Apr 16, 2021 11:44 am

Post by TomCat »

Thanks for the helpful reply, nabrU!

Where do you look out for lease offers like these? I'm in no hurry and this could be what tips me over the edge into going electric with an ID.3.
gailjon
Posts: 284
Joined: Thu Jan 21, 2021 11:16 am

Post by gailjon »

Hi TomCat. I have leased (Personal Contract Hire) for many years and tend to look at LeaseLoco and Leasing.com. You can search for make, model, deposit, term, mileage, etc and whether cars ar ein stock or factory order.

These sites are for Personal Contract Hire though, not Personal Contract Purchase.

PCP is more expensive than PCH normally as PCH is basically hiring a car for the allotted time and mileage whereas PCP is paying for vehicle and having ownership using a balloon payment at the end to lower the monthly payments. PCH means the vehicle is owned by the lease company and PCP means the vehicle is owned by you (but with finance company holding the loan over the vehicle like a mortgage on a house).

If you never want to own the vehicle and just change every 2, 3 or 4 years then PCH is great as you don't have to worry about residuals, paying RFL, etc and you just start looking for a new car deal towards the end of your lease and get the new car delivered same day as the old car goes back to the lease company.

However, PCH means that you can't easily end the contract early without paying a percentage of the remaining monthly payments, sometimes 100% but many lease companies reduce this to 50%. This is stated on the lease agreement. PCP, as you own the car, means you can sell the car/trade in the car and pay off the settlement figure. However, most PCPs are set up so that you will pretty much be guaranteed negative equity in the vehicle until quite close to the natural end of the lease.

My issue with PCP is that while you defer payment on the capital of the balloon amount, you are still paying interest on the entire amount borrowed. This normally makes the monthly payment high compared to a PCH. All of this does assume you are not paying a stupidly high deposit (for PCP) or initial payment (for PCH).

PCP and PCH rely on the residuals of the vehicles to determine their monthly costs. Therefore, if a lease company thinks a Model 3 holds 50% of its value after 48 months, but the ID3 is only worth 30% then the Model three will have a monthly payment similar to the ID3. However, the ID3 is probably going to have far greater discount available to the lease company and its payments should be lower.

First thing I would do is work out whether you want a PCP or PCH. The sites I mentioned will give you a good idea on the PCH costs for both the ID3 and the Model 3.

Like nabrU my wife got a pre-reg Family with alloys, heat pump and metallic for £331 on a 1x36 10000 mpa deal. Stock deals on PCH can be very good value.

Hope this makes sense!
ID.3 Family, Andoya Alloys, Heat Pump. Grab a £50 Octopus Credit https://share.octopus.energy/silk-guppy-104
TomCat
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Joined: Fri Apr 16, 2021 11:44 am

Post by TomCat »

Thanks, gailjon: that was very clear and helpful. I'll keep an eye on how those prices change over the next few months.
ozzymac1
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Joined: Fri Jul 14, 2023 4:43 am

Post by ozzymac1 »

Your advice about waiting for good deals and not solely relying on the official VW website is valuable.

Based on my own interest in exploring different types of financing options for purchasing a car, I have a question :
I have considered leasing as a potential financing method for my next car purchase. Could anyone share any personal experience with leasing? What are the advantages and potential drawbacks anyone here has encountered? Additionally, if you guys have explored other financing options, how does leasing compare to those in terms of affordability, flexibility, and long-term ownership prospects?
Sanya
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Joined: Sat Nov 13, 2021 1:15 pm

Post by Sanya »

I’ve leased a couple of times and it worked out cheaper at the time due to volume discounts and stock deals that lease companies can negotiate (both of the cars I leased were runout BMW stock).

My current car is on PCP as there was little difference in monthly cost when options were added to the car, such as alloys. From my experience lease deals tend to be for a fixed spec car with the only choice being the colour. Additionally, the option to purchase was appealing. You cannot buy your lease car due to tax rules.

I found the leasing process simple until the end of the lease where the date of collection may not marry up with the arrival of your new car. I’ve been without a car for a couple of days due to scheduling. For some that might not be a big deal.

Prior to the collection a vehicle inspection is completed which can cause some anxiety. Thankfully the industry has a solid code of conduct now meaning any repair costs (kerbed alloys wheels for example) are sensibly priced these days.

I have a couple of years left with my current car and fully intend looking at leasing again should I not want to purchase my current id3 or start another pcp.
Family Pro Performance | Glacier White | Sanya 20” alloys | Delivered March 2022
3rd time EV owner | BMWi Pure wall box.
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