Makes me glad I bought my e-Niro First Edition out right on pick up. Cost me £33,000 (after the grant, £3500 at the time). Sold it back to the dealer for £31,800 (in exchange for a MY22 4+). 20 months of use for £60 a month. That's a win in my book.
@@stevendegreef93 Nope. Retail with 3 years service, mats, boot liner and the metalic paint alll thrown in for free. (it was a showroom car that had only been in there for 2 days. )
What Andy's figures here didn't include was the 'lost interest' on, in your case, the £33k you might've otherwise had sat in a bank / ISA over the 3 years - obviously, not great interest at the moment, but still should have been included. Albeit on a reducing balance, even at 1.5% interest, that'd be about £500 per year, maybe...?
@@jonathantaylor1998 Only had the car for 20 months. ISA interest would be negligible. Plus my £33k included a £17k part exchange. So effectively £16k cost.
Thanks Andy for a great overview. I recently chose financing - in Germany the rates are so low still, it's almost 0pc. One huge factor against leasing for me was the mileage restriction. 10k km yearly is crazy - it defeats the purpose of having the freedoms of a new car when you have to watch how much you drive it.
I got a PCP ( 3 years) on my Nissan Leaf 40kw Tekna 2019 last year and it cost £19.990. With £5000 deposit it cost me £226 per month. I am very happy with a car, specially when I see the petrol priced at this time.
It's worth pointing out that for many people like myself, we're leasing a car via salary sacrifice. In your example, my costs to down whilst leasing to £11,880. The lease also covers all maintenance and insurance which is another factor. It suddenly makes leasing the best option. There is a slight issue with impact to pension arrangements for some people, but that isn't the case for me.
I've just gone through this and I have moved from leasing after 10 years and gone to PCP. The lease deals are pretty poor at that range and are very close to PCP. Over a 3 or 4 year lease the saving on the lease was less than £1K. Throw in a bunch of manufacturers specials and benefits such as free servicing etc and you may as well take the risk of getting some residual value in the car at the end of the term. In the end the PCP was £500 lower deposit and came in £15 a month cheaper. So there you go, I took a PCP on a Polestar 2 which I believe will have a good amount of money left in it at the end of term. The Whiteboard speaks!
I liked this but I don’t understand why. I felt worse afterwards. What you said, especially about the mileage on a PCP is so bloody obvious, I cannot believe I did not think about it before. I feel like a bit of an idiot now. Thank you for making that so understandable!
2019 M3LR. Got the £35k, 0% Energy Saving Trust loan (Scotland only) and paid balance in cash. Payments under £500 a month over 6 years. Depreciation way less than could ever have been anticipated. Reliability better than anticipated too. With the fuel savings easily covering the depreciation, it's probably one of the best car financial decisions I ever made and I used to be a proponent of bangernomics.
Without something similar being introduced in England, it's completely unrealistic for the average family to be able to afford a £35-55k car unless offered on 0% finance over 5+ years. So either the government needs to step up, or the manufacturers need to help, to entice people into their lovely (but very expensive EV cars). Would love a #Genesis GV60, maybe I need to move to Scotland ;-) look what you might have started Graham lol...great comment, Ty.
You can make leasing work in some circumstances. Last year you could get a MG5 Long Range at £300 month on a 36 month, no deposit. Came with free insurance, £250 cashback, tethered EVSE home charger and install, plus other freebies like breakdown, dashcam. About £2000 worth. So (300x36)-2000 = £8,800 total cost. I figured the £30k value would be around the £20k region after 3yrs being an old-fashioned shape. £21,200+ then PCP wins. Without all the goodies then PCP wins. Unfortunately these days they have removed most incentives and monthlies have gone up ~£75 on just last year.
Yes only buy 2nd hand, and we buy with credit cards and then transfer balance, interest costs are less than a grand over 5 years. Great video will share!
Good summary and lot to consider. And as pointed out, this does not even go into issues with company owning versus leasing cars and being able to play with operation versus capital expenses tax treatments, etc. But, no matter what one does, with a Tesla you come out great. Here in the US, for many Tesla models it takes over a year between order and delivery. And during that time, the order price of the car will be 20% or more than your order price which Tesla honors.
Gonna buy a New Kia Niro Estate EV, I'm doing PX (but may sell privatly), savings and the cheapest loan I can find, had a pretty solid offer of 3% Apr from AA (dealers usually quote 4.x%) . As you say though there is zero incentive for discounts. Best advice I can give anyone is to save loads and then overpay on any loans as the quicker you reduce the balance the less you pay.
Thanks. In the states we have the option to buy our leased car at the end of the lease or give it back to the dealer. I lease so if it's to my advantage to buy it at the end of the lease I will, if not I'll get another lease. Leases cost more but you always drive a new car, never need repairs and don't have a hassle trying to sell your car, especially if you get a dent, so if you can afford it leasing is the best option.
I think terminologies are different in different territories. the PCP in UK would work like that too. Pay the money each month and at the end of the term walk away if you wish, OR pay the final payment and it is yours. You can and some do, refinance the "Baloon" final payment but this is rear as there will probably be a good deal for a new car on offer to tempt you.
One of the key differences is flexibility. I am in the last year of my 3 year lease. Not complaining about what I am paying as it was a good pre-pandemic deal. To get the same car now would cost about 80% more 😱 So I got a quote for extending the lease a year without extending the miles. The lease company would increase the payments by 15% for the 18 months that would then remain. Once you commit to a lease, you are very much in their hands.
Yea, I was surprised he didn't mention the potential of fees for goin over miles unless that's less a problem that side of the puddle. Certainly plenty of people end up fleased here in the states where we logged more miles. IMHO If you can't afford the car straight personal finance on a term shorter than it's warranty you need to save more or buy a cheaper car not look at a lease as an option to get lower costs this month.
@@chublez His reason was, you never hand the car back at the end, you sell it. Only extreme high mileage cars woudl there be an issue of running up short doing that.
Right now, the salary sacrifice thing makes a huge difference for EVs because the BIK rate on an EV is 2%. So you pay the lease with money from salary before income tax and NI is taken, and then pay 2% instead. While that remains the case, it changes the result - especially for people in the 40% tax bracket where it almost halves the lease cost. The other thing with a lease is I believe they usually come with servicing etc all included - which makes it a bit like renting a car but for a long term. Not that you'd pay £8k for that over three years! Of course - the BIK rate is set now until end of March 2025 (I think), but who knows what the government will do after that...
however the lease companies have cottoned on so the original price is often inflated. You still save money vs a retail lease, but not nearly as much as you’d expect considering the tax saving
Doesn't salary sacrifice also reduce your pensionable income so your employer will contribute less to your pension which you will also need to take into account
@@Adam-lx4et not necessarily - depends on the lease and your employer. On our case, it doesn't. Our 2021 m3 LR is 400/mo including all insurance tyres and servicing 10k miles py, no deposit.
Playing the game has now enabled me to buy a much more premium car now. Bought a leaf in 2018 for around £30k on pcp with a very low balloon payment. It was the same monthly cost as my Corsa diesel at the time when adding car payment plus fuel cost. Charging for free at work made it a no brainer. 4 years later i have just sold it for £16,400 giving me a nice big deposit for an almost £50k polestar 2, again on PCP. Didn't get a tesla as insurance is too expensive to include my mrs with her provisional licence (£3k). Also the pcp isn't as competitive as offered by polestar (balloon payment is low). I will be paying £50 less a month than I currently do on my leaf.
Less skill playing this game and more luck right? You know the balloon payment is based on assumed depreciation. It’s generally not a perk of the deal.
Great explanation!, Im always saying that when someone ask me about the pcp and picking the right car with the right options extras etc sometimes make a good difference 😎
Great explanation of the options. I disagree that if you go with PCP you should select the lowest mileage. If you intend to pay the balloon payment at the end, the lowest overall cost option is often to put the highest mileage possible. The monthly payments will be high and the balloon payment much lower but add it all together and the total amount is normally slightly less than going with very low mileage. It all depends on whether you want to pay more per month and less at the end, or the other way round.
Excellent video. 6 months on, I think the market has adjusted a bit. I have just compared a number of lease and PCP deals on a Kia Niro EV. Based on expected depreciation of the Niro (39% reduction in value in 3 years according to Autocar and other sources) and leasing is now somewhat cheaper than PCP. This delta is magnified a bit for company car buyers (50% VAT reclaim and tax relief). I still learned a lot from this video - perhaps an update would be worth doing?
Another insightful vid. I've done the same calculations but with my works Salary Sacrifice (SalSac) scheme which is difficult to depicte as you have in the comments but essentially for a Model Y LR on a 3 year term: Total Asset cost: Tesla Loan = £22,273 Tesla PCP = £24,274 SalSac = £19,318 I used 30% depreciation which was close to your 31% (asset £40,663 after 3 Yr) as you said obviously this could be more unlikely less. The tax saving you get through SalSac makes it very attractive, though worth noting the amount of saving differs depending on your Tax banding (above calc done as Higher Tax payer)
Also forgot to add that SalSac includes all servicing, replacement tyres, breakdown cover and insurance, never had PCP or Loan so don't know if theyre also included?
With salary sacrifice you also need to consider any impact to your pension contributions and the cost of any top you you might wish to do to ensure your pension is not affected.
@@damiendye6623 Well it kinda depends on how high the employer contributions are, how long you lease for, whether you are on a final salary scheme or career average. The impact of all that needs to be considered so individuals can determine if the impact is significant or not. These SalSac schemes promote the net deduction and if that is all you look at, you could be in for a shock if you end up leasing through SalSac for 20-30 years of your career.
Great video thank you. I did all these maths when getting my Kona EV mid pandemic. I went for lease, I appreciate we are in uncertain depreciation times that favour PCP but this hasn't always been the case. I used to hate watching my cars depreciate and losing my asset. I like that it's not my car if it goes wrong (accepting all cars have warranty) and depreciation isn't my worry. That said it was £300/m with 3m deposit over 2yrs. Those deals are non existent now but at a 34k car quite a bit cheaper to lease than Tesla. Also no interest is added onto a PCH, the dealer PCP interest added several grand . In 18 months time with the market the way it is I will either extend lease or PCP/HP. No way I'd pay £450-500 a month for a small EV.
I managed to lease an Ioniq 38 Premium SE for £217 (VAT inclusive) including servicing and tyres in July 21. I had a choice of colours as well, but the crazy thing was that if I had gone into a Hyundai dealer the same car would have been £474 for 12K over 2 years. That is with one month down. The even crazier part is that it is via Hyundai leasing, but through a 3rd party. If I had gone for a 3 year lease, it would have been £317 a month. When I leased in 2016 I had a B8 Passat GT estate and the VW leasing guy showed me the figures, car with metallic OTR £29675, VW would sell the car to VWFS for £23500. Lease then done on that value. To lease was 3/35 x£335, PCP was 6/35 £374.
So you are paying something for something you'll never own. Waste of money... Your lease cost you £7,200 and you have nothing to show for it. I spent £1500 on my vehicle 14 years ago... My total spend on repairs in 14 years has been £700
It’s worth pointing out that the PCP balloon payments in a normal market are calculated to essentially be slightly under the value of the car at end of deal assuming mileage limits. If you put a deposit in, in normal times you don’t get that back. If you think about these finance companies they aren’t planning to let you buy a car for £19K worth £30K. So when doing these comparisons safest is to add on 5-10% of residual as asset value. And that is how pcps are designed to work. Sure the inflated market is crazy now but dangerous to assume it will be that way in a few years. Second hand prices already coming down month on month. Leasing in a normal market is usually cheapest in total cost.
I am currently looking at a 2021 Renault Capture £12750. A deposit of £5000 for PCP monthly payments £124.47 x 48 months, total payable including option to buy £15328.59. On HP same deposit monthly payment £197.85 x 48 months total payable £14506.80. Between the two agreements that’s a difference of £821.79. That makes PCP more expensive than HP which is a rip off. Other cars I’ve looked at similar price with difference between PCP & HP £1000-£1500. In my own area I’ve found that car dealers prefer you get the car with PCP instead of HP,on their websites very few give quotes for HP. I am sure that’s the situation everywhere else.
Love the "Whiteboard of Truth"...! And, your added 'clothing explanation' note on the Intro... just hilarious...! Anyhow, I was actually quite 'pleasantly' surprised that there was only about £1,500 total cost difference between HP and PCP. I think, on that basis, I'd be tempted to take the PCP option simply for the added protection in case the bottom dropped out of the used-car market during the time period...? Plus, then the extra £483 difference per month could be put aside in a 'high-interest' account / ISA to offset that difference a little, too...
Looked at these options and went for hp over 4 years. Wanting to keep the car it worked out more a month to put money aside for the money owed in a pcp. Lease too much money Great video btw
Thanks for the video. That's how it should be (buying is cheapest but more upfront is needed) however whilst it might be easy for a Tesla, it's often not so easy to work out for many others. The discounts that were available with PCP, the fact that some lease companies but not others allow you to buy at the end (but without a guaranteed price) and the mileage constraints (who knew lockdown was coming) make it all a bit of a lottery sometimes. I ended up with a 3 year PCP because: 1) I didn't quite have £100k to buy it outright 2) I didn't want to put down the 50% deposit needed for manufacturer HP 3) The bank wanted an insane interest rate if I borrowed more than £30k 4) I got about 10% off for financing PCP 5) I just didn't fancy a lease where I might not be able to buy later 6) BiK (non-EV) was stupid if I went through the company 2 years on I thought I was going to hand it back at the end because values weren't great. Then pandemic. The value shot up and I paid the GMV. In retrospect, PCP turned out to be the best value by far. I thought it was going to be slightly more expensive than buying outright. I guess I got lucky. I still have the car now and plan to keep it.
The TCO is not sexy for the folks. Sticker shock scares the crap outta them and then they don't want to deal with the up front cost. My SR plus has gone up in value over the 2 years I've had it and my friends who succumbed to my free test drives who then bought one are now delighted with the value of their cars being a lot higher than what they paid. As of yet I have not received any commission from them. You add in the fuel cost savings and it starts to get embarrassing. I talk about TCO and it looks like I'm showing off... Good videos man
Well done for doing these sums (and pointing out that 'not finance' is always the best deal if you have the money). I've never bought a car I have to get finance on and don't intend to start now, even though I am looking at a very expensive ID Buzz Cargo or Arrival van next.
So this just popped up in my feed , its a year old in 2024,and one year later, models 3's at3 years old are about £10k cheaper than guesstimated here. Looks like the cliff occurred.
Exactly this, before he put the figure in I was guessing 20k when he put 32k I laughed, actually I don't know the value I can't be bothered to check, but if your saying 22k I was close, ev residuals have plummeted
It mostly depends on if it's a personal or business vehicle and on how long you intend of keeping your vehicle. With leasing you will be be paying every year for the rest of your life. If you keep your car a long time leasing is daft if you like to change your car every year or so finance is daft . With ICE cars I used to pay finance over a few years then get a few years no payment before selling it and starting again.
I went down the rabbit hole when it came to leasing my Kia E Niro. I will look at ending my lease at 50%, only problem is the long lead time for a new EV. Hopefully by 2024 the delivery times will have improved.
First of all thanks for this video. It's very relevant to me right now as I'm trying to figure out if I can afford to get an electric. Not sure we have the PCP option in Sweden but I'm very interested in finding out now. Going to some dealerships on monday. And I think that after 3 years, that £46k Tesla is probably worth at least £30k. Impossible to say what will happen in the next 3 years of course but so far they have held their value incredibly well.
This has convinced me to keep my old petrol car as it only costs me £85 a month in petrol even at these high prices , I’m just going to run it til it dies , no way I can afford those monthly repayments for an EV
The collapse of three year old Tesla model 3 trade in has been dramatic. Without the benefit of hindsight your reasonable assumptions, 2 years ago, of trade in value is now more likely to be £21.5 k. Ouch!
What a fantastic video! thanks for that, I had no idea that changing the miles driven would make such an impact. But I've just tried out an experiment on a Kia EV6 PCP, and seem to get the opposite result! If I declare 6k miles/year, with a £25k deposit, I pay £186/month, but the balloon payment is £25k, with £5359 interest to pay. If I declare 30k miles per year, my monthly payment shoots up to £393 but the balloon payment shrinks to just £17k with interest payments of £4540 -- over £800 saving! Now, the monthly payments may end up eye-watering, but overall, this comes with a substantial saving. I wonder why this is different to your Tesla example? May be worth warning people that not all PCPs are the same.
If you can get something new reasonably quickly if you have a personal lease it’s worth talking to your lease provider. At the moment Kia are happy to take our Soul back after 14 months and not charge me 50% of the remaining payments (as is the usual common practice and in the terms for the lease) because they can make more on flipping it that the relatively good terms I leased the car on (1+35, 8,000 miles per annum £310 per month) over the remaining 21 months. I’m currently considering getting a new Niro to replace it on a loan / pcp as I have a get out of jail free card
Thanks for this it is very useful. There are always exceptions and some golden deals can be had. I always bought my cars and owned them afterwards. I had a deposit down on a Tesla model 3 and pulled it in 2018 as I had an unbelievable deal for a car worth around £38K on a 30 month lease. In my case a manufacturer offered a very limited number of Volvo S90 D4 Model R for £220 a month (+ £2K down) and I wanted to bite the hand off the person who offered it to me. This was cheaper than when I bought a 3 year old Jaguar Model S 3.0 Diesel. I was very very lucky and got to drive a car that was brand new and I enjoyed the new car feeling when I got it. As I was never able to buy a brand new car this was my first new car and a very up market one to have that, to have the experience with. I thank my lucky stars that Volvo chose to clear it's 2018 diesel stocks of S90 early so it could offer it's 2019 spec cars earlier. The 2019 models had ad-blue so were much greener. I wish everyone luck in finding a very advantageous deal when they look for a car. Good luck everyone.
As a high mileage user I get pcp's for the 1st 2 years then buy it out with an unsecured loan that falls in the sweet spot which is what I have just done with my zs ev, I now have the freedom to make a choice now
Here in the Netherlands a private lease is classed (and registered) as a personal loan, though the lease companies prefer to keep that quite. This can have an adverse (massive) effect on the size of mortgage you can get if you intend to buy a house and for some people that comes as a shock. And as one German viewer mentioned, the lease price only 'looks' attractive if you drive 10,000km per year, or less.
Interestingly, 3 year old model 3's are selling for around £45-50k depending on mileage 😱 The only problem being when you come to sell you have to wait 6-12 months for a new car or buy an inflated used car which I guess all becomes relative to some extent. Great video 👍🏻
My LEAF is £127 per month! 2 year lease with 3K deposit. I know that was good but it has proved the the LEAF is the right car and I have ordered a new one for delivery next year. It was an expensive test but proved the viability of an EV for me...
Bought my 3 month 71 plate and 700 mile old leaf tekna 40kwh in January for £25k paid in full WBAC are offering £24865 with 5500 miles on it today. Cheap motoring especially as I charge at work for free.
Thanks Andy, the one thing you forgot to add in was the mileage, the agreed mileage can have a big impact on a lease, and usually the reason I have avoided them.
There's another very important factor though: Opportunity cost. How great that is depends on where you live, but for example here in Sweden, you're only allowed to borrow 80% of the purchase price, so you must pay a 20% down payment. Combine that with the higher monthly costs and compare to not paying anything at all upfront for the lease and you have *a lot* of money that's not generating income for you trough investing. At 10% per year, that downpayment would have grown by 33%. PCP seems like a pretty great middle ground, but I've never seen that offered here.
I use to do PCP, but when got my e-Niro went with a 3 year lease, worked out same price as my PCP. Why I like lease on EVs is tech is changing so quickly, I do not need to worry about being left with a paperweight at the end of it.
10 year old Nissan Leafs are going for a lot of money still. A car is a car. Tech doesn't make one obsolete and never will. A new BMW M3 (with new engines/tech) doesn't make the old M3 useless. They're cars, not laptops.
good video, in this scenario, i'd go with the loan rather than buying with cash, invest the 46k you have lying around , a return as low as 2% pa would make it cheaper than cash, (I'm not a financial advisor)
After the total cost, you can go to the total cost of ownership. With the lease the insurance, road taxes, 'side road help' or however you call it. All that is included. For the other ones you have to add these. Then the cost of ownership can be very different in some situations. Because you're $703 per month, becomes $850 very quick. And that is without maintainence.
Just had an interesting meeting at a dealership, where they tried to sell me a PCP deal, not a car. What happened to the salesman that asked what you used a car for, who travelled in it, how often you changed it, what annual mileage you did and what your typical journeys look like? Interest charge over 5 years was >£5k and no discount against list price because they could sell every car allocated to them. The interest cost on a PCP is calculated on the OTR price less your deposit, so on a £40k car with 10%, you will pay interest on £36k over 3 or 4 years but because you do not amortise the loan to zero, that will add up to a lot of interest unless you can find 0%. Yes, the capital repayments in isolation are low, allowing for the GMFV, but it is still your hard-earned cash going into the finance Co.’s coffers when you also have to pay the interest. The APR is critical and consider HP or an unsecured personal loan over a longer period. Look at the total cost in the quote. I found a dealer further afield willing to offer a discount and I will buy for cash so saving the interest (but losing credit interest on my savings, which remains a joke).
I still went for PCH for my car as I know exactly how much it’s going to cost me (£5k/ year) and I’ve never sold a high price car privately, makes me nervous being scammed.
It’s a shame that used car prices have dropped like stone, so PCP might not be cheaper as interest rate is now really high & if on PCP. You hand the car back a bit like lease
Just to add many Lease options let you ‘buy ‘the car at the end of term, agree its down to them how they value it but there is at least a possibility the figure could be comparable to PCP.I got my model 3 via Lex Auto lease on a PCH, i cannot buy the car myself as there are tax regulations but they will gladly sell it to a partner/family member so effectively i keep the car.
We're currently leasing a Model 3 SR+ but it's a 4 year lease, 8k miles per year, £425/m through a third party leasing company. Telsa were about £100/month more for the same lease period so it's worth shopping around for a better price. To be fair we needed to keep the monthly price down and the purchase options from Tesla were just too expensive.
This is a great intro for car finance. I bought my car HP - one advantage you don't mention is that you can pay extra, end it early, and save some interest. Has the Driving Ohm podcast address changed or something - none have popped up in my podcast app for a while.
I know you stated it as a big unknown but the last three months car sales are down on used market so there is pressure already to lower prices, so not sure I would be confident in saying prices will remain high for 3-4 years. Also as already mentioned by a few others if your going to buy the PCP put mileage as high as you can that way you will save on interest if you go full term so with Tesla you will pay £300 less that way. Same mindset on savings you didn't cover potential to haggle with PCP and HP - whilst there are less deals out there, if you can find it cheaper than OTR price you should be able to get a PCP on the deal price as such - so for example £2500 off a Mokka e currently is an option. With a lease Im not sure of the benefit of front loading as such cost I would always load it other way smallest deposit so 1x or 3x as that way if you want out mid term you only pay half the monthly payment which would of been paid upfront if loaded and that's then not returnable. Overall payment over term doing this is normally a few quid difference. Finally leases are not as good as they used to be so for sure you need to check don't assume like you said - Ioniq old model is the only car I could find that had 4 year old models for sale and still available and that was a lot closer call with PCP v Lease 2k saving again with the risk prices fall.
I have just taken delivery of a BMW iX40 on a lease. I crunched all the numbers and could not get a PCP or HP deal to anything like the same value. A PCP would have cost £280 pm more and would have required a £12,000 deposit on the same 10,000 mile a year, 4 year deal. My previous car (an X5) was a 4 year pcp and the lease deals were a lot more costly than a pcp when I got this car. A bonus was the £8,000 profit in buying the car on the final payment and selling myself! However, previous pcp deals have only ever broken even, so I think the profit this time is just circumstantial and I think the value of your Tesla is inflated substantially in the current (temporary 🤔) market, so I think the notion of any profit in 4 years time is likely to be flawed. Of course, I may be wrong, but £12,000 up front and 48 x £280 a month is what a pcp would cost me above the lease… what are the chances any value above the £25,000 of additional outlay the pcp would take? I also think my impressively high tech car might seem more dated than the past experience with electric car and battery tech moving so quickly. Will my 260 mile range suddenly seem ho-hum with potentially sub £40k 4680 teslas doing 400 miles? All in all, I love your content, so this is not a criticism, it is more reaffirming your own contention that everyone needs to crunch their own numbers and make the choice that suits them! Keep up the good work! I love your solar and home battery content too! 👍
Very interesting video, even though I live in Canada! One comment about buying for cash, though: if one can afford to pay cash, it's worth looking at the financing options anyway, because it's possible that investing the money would yield a higher return than the money saved on finance interest.
This is certainly the case in North America. I don't know if its still being offered but polestar were offering 0% on their cars. Fabulous deal if the car works for you.
@@kj_H65f That’s a good point, and obviously something that one must consider when deciding. But even a paltry 1% interest compounded over 3 or 4 years will be a win if one can get 0% financing on the car.
I would say that there is some risk in severely (>5k miles/year) under stating your annual mileage on a PCP. The balloon payment at the end of term is a guaranteed future value which is based on the mileage you stated. That’s not going to stop a dealer wanting to get you into a new car but does give them a tool to use in negotiation. Having said that the contract should clearly state a cost per mile over the limit and they are usually quite reasonable ~7p mile I think mine is which is only £1,050 for 15,000 miles over. As you say - do the maths yourself it’s equivalent to you paying yourself to do the maths by the amount you save!
@@ElectricVehicleMan yes they will but the market value will also be based on the mileage it has done. The same car with 15,000 miles more on the clock will be worth less than a car with 15,000 miles less. I guess my point is don’t think that you will save money by putting less mileage down for your PCP. At the moment it is completely crazy though so you’re getting well over the normal price on everything - high mileage or not.
@@olski001 if you're keeping the car they don't take into account the mileage if you go over, because it's not their problem. If you chose to give the car back and it has more miles than you specified, only then do they calculate an excess mileage charge.
It's interesting watching this 9 months later because prices have sort of gone off a cliff mostly thanks to Tesla doing their big price cuts in January. It's great news for people trying to get into EVs or trying to get into a better EV that was previously way out of reach. Unfortunately intrest rates over the past 9 months have gone the other way, crazyily high compared to what we've been used to. Perhaps this video needs an update. I'm sure the final answer will probably be the same but the figures will be vastly different.
One big issue with your comparison, never ever, get a lease direct from dealers. It's no wonder the lease one came out bad, the RRP of new vehicles doesn't change much from dealer to dealer, but lease deals certainly do. eg. My last lease was an A250, cost new about £31,700, So a 3 year loan @9.9% would cost about £1K per month, after 3 years the car was about £22,000, so total cost for 3 years = 36 - 22 = £14,000. This same car I leased for 15K miles, 3 + 35 =@ £300pm = £11,400. But the main benefit from my POV, its just way less hassle, having to sell your old, buy a replacement, and if you use dealer getting a really bad price for your old car etc. My current car EV, I've also leased, but the calculation get a bit more complicated from going via company, due to BIK, VAT & TAX reasons. Put simply, there is no way I would have been able to afford it using PCP etc.
Interesting but you have to consider that to make the greatest savings you have to tie up more of your capital. Therefore you'd save the most money if you bought the car outright 😁
Just considering buying either a Honda e, 2 years old, 10.000km run, €36.500 at Honda, or a Model 3 SR+, 4.000km run, 4 months old (made in china, LFP battery, basic autopilot, black color), €55.000. I can afford a down payment of €30.000 and would HP the rest. Although i love the Honda e to bits, in terms of looks, size, and design inside and outside (which is kinda redundant), it looks like the Tesla is the better choice, although it is actually a bit more expensive than new. But new Teslas can be delivered in 12 months, so that is not an option as i need a car now. I do not like the outside looks of the Tesla, do not particularly like the centralized iPad (but like the general user interface). And of course there is the tiny but very annoying issue that my spot in the parking garage is on the lowest level (-4) and it is extremely tight to drive down and up, basically requiring a 3 point turn at each ramp. Which the Honda can probably do without the 3 point turn as its turning circle is tiny. But of course the charging network, long range possibility (living in both Porto and Berlin might make it necessary to drive at times) and a lot more space in the cabin are the plus side of the Tesla. Decisions, decisions.
We bought an ioniq5. Went to the Hyundai dealer. Dropped just under 50k can’t be bothered with owing companies. & that car is ours. Dealer was saying see you in 3 years. I was saying yeah yeah. See you in 10 years. I am not giving up my car. It will see me nicely into retirement.
On higher value cars, the drop is a lot bigger. So Lease vs PCP almost the same and you may as well buy a house if you are going to get a 100k+ loan. Plus, what if you get a lemon that will not sell? Double whammy. The higher lease cost is the ‘insurance’ that says I do not have to worry if indeed it is a lemon.
Interesting. My understanding is the final PCP balloon payment is what the manufacturer considers to be the final depreciated value of the car. Before second hand car prices went up if a car was worth 40% of its new cost at 3 years old then you were doing well. I’m one year into a 3 year lease of an ICE vehicle. It cost 20,000 and was forecast to be worth £8,000 after 3 years. So the depreciation is £12,000. My total lease cost is £8,000 so I think at the time I made the right decision. Not sure I’ll do the same in 2 years though. With regards EVs. If there is a revolution in battery composition resulting in lower cost and/or better range then current EV’s will plummet in value. That’s why many people are leasing EVs and not buying outright at the moment. You’re insuring yourself against progress making your car worth considerably less after 3 years
Never understood the leasing! I have looked at it a few times, but even without something like this, it always seemed pretty obvious to be that it was a dumb option! Mostly you have to pay around the same pr. month, but you don't have any asset in the end of the lease! It is like renting a house vs buying it! You pay a lot, and have nothing to show for it after! Only upside of leasing to me is that you can easier upgrade and change to newer cars. since, as you said, you are probably no going to run a loan for only 3 years!
In all the lease deals I have ever seen, the monthly payment is only less than the PCP payment if you pay a much larger deposit. All the arguments in favour of lease assume the car will be worth less than the balloon payment, the car is going back to the finance company and this is the last car they will ever need so they don't need any future asset. Doesn't matter what it is, leasing is always more expensive as you'll never have anything to show for the money paid at the end of the deal.
Who are these people that can afford (Lease pch) £6,708 a year + £6k deposit and have nothing to show for it after 3 years? When for an extra £1,728 a year you get a £32,000 car after 3 years. Its not like these people are skint paying £6,708 a year to rent a car, my mind is blown.
Very true and don't get me wrong, I agree it's a false economy currently to PCH, but there may be those that can't generate the £19k to buy the car at the end of the term in this example to realise the £32k 'asset'. Having said that, in the £6708/year to rent a car case, one would hope they could generate the finance to purchase from the finance company at the end of the term on PCP...
Unless you’re not bothered about actually owning the car and want to get another one at the end of your lease period. EVs more than any other car are getting better & offering more, so if you lease for 4 years, you’ll be looking to get something better next time around (greater mileage, more accessories etc). Ultimately, it’s all about affordability & if it gets someone in an EV, that’s always a good thing (unless they’re stopping me from public charging next time I need to 😂)
It's ironic that someone that can't afford to buy a £45000 car outright, can afford to throw away £25000 and have nothing at the end of it. Completely dead money just pissed away
Depends how much you are prepared to lose. Other than this strange times, new car depreciation is horrific. Some people are comfortable with an asset losing half its value in a couple of years (traditional depreciation). Others will want peace of mind on total cost over a period of time, not to own the asset and give it back. It's no difference to buying a mobile phone. I don't know why more people don't buy the handset upfront and SIM only on a MVNO instead of committing to the big players for 2 years. Horses for courses
@@danpaul4975 If you bought a £45,000 car what do you think it will be worth after 3 years? Sure you have the car (an asset) but it’s not worth £45,000. You’ve ‘pissed away’ whatever the depreciation is
Finally somebody who sings my tune. Bank loan for 20k at 250 a month, 8k part ex of old car - Tesla model s facelift 50k miles facelift. And the 250 a month saved on oil funds the loan. Thoughts?
Thanks, really useful. For the first time ever we're looking at buying new given the crazy second hand market. The point about excess mileage on PCP had completely passed me by so that you for that (have previously bought second hand for cash). Also re your point about sallery sacrifice not stacking up, our other car (Soul EV) is a company car through my work and is for now ahead of having gone another route, no idea if that will be true for another one in 30 months time when it needs replacing though. Keep up the excellent content, it's largely due to your videos we got our first EV 18 months ago and now we're heading towards having two!
Current 3 year old SR+ are on auto trader for £39k (insane) Leasing a couple years ago used to be vastly cheaper, you had to hunt for the deals (over stock) and most cars had at least 50% depreciation after 3 years. With a good deal it could have been 20-30% cheaper total cost of ownership to lease, far less than the depreciation on the car alone. Now there’s no stock so no massively discounted rates for leasing (years back I was offered a new £85k BMW M5 for £550 a month lease 3/24) and second hand prices are super high (especially Tesla’s) so PCP can be good, if the balloon payment has not been raised excessively. Also watch the total amount of interest you pay on any finance, dealers especially tesla who are rarely cheap. Also watch who you P/X your car against, Evansville Halshaw paid 8k more than Tesla for my Mercedes (pre stupid prices)
Well this is very intereting to watch NOW, with used EV prices absolutely plummeting... I am actually looking at a used Model 3 Long Range about 2-3 years old, for $25k or less, and the mileage isnt terrible; I've seen anywhere from high 20k's to low 40k's. With that said, you would still be on top if you bought and financed $46k and the car is now worth $25k vs leasing, which is crazy 🤣 For reference Im in USA, but the prices are quite similar in this comparison, just for a Long Range MP3 instead of Standard.
Good comparison, thanks… when I got my E-Niro in 2019 I went with lease to make it affordable and wash its face against previous 130000 mile Mondeo and make it affordable; did the math but didn’t see the future 2nd hand market or the effect of the Pandemic and so on. So you live and learn, I will definitely consider the other options when the lease runs out but we have to consider monthly affordability as well. TBH the market is bonkers and that’s the real problem! Can you have a word EVM? 😁
Had a cheap ish on pcp. Final payment £3500. Sold privately 2 years later for 4800. Before you say blar blar prices have gone up . That was in 2017. Never hand car over!! Incidentally VW offered me 2800. How I laughed.
Great watching it back but it has aged a lot. I suspect the current value of the discussed car is around £25k, which makes all 3 options very close at the moment… I am very happy we went the leasing way on the Tesla as the prices went down through the floor!
For a higher or top rate tax payer, salary sacrifice lease still does make sense (is it right that high earners are getting subsidised to buy their Taycan's... probabably not!). Are the lease companies overcharging for depreciation and pocketing some of the tax savings for themselves? Absolutely. Do I wish that I could get the tax savings whilst actually being charged a fair headline lease price with realistic depreciation? Yes. But when I did the calculations the car (in my case Model Y) would have to retain 80% of it's value after 3 years / 36000 miles to make it cheaper to buy on finance. That's I think budgeting on the low side for insurance/tyres/breakdown cover etc that are included in the lease. I think it's not impossible that the Model Y is worth 80% after 3 years, but it's far from certain. My own personal expectation is more like 65%. I'm hoping the market normalises a bit and the lease company will let me buy the car from them at a reasonable cost (but not holding my breath) There are also some secondary benefits like having the weight of the lease company to sort out any problems if there are any
It depends on the car aswell, it's alright making these comparisons with teslas but when you can lease a Nissan for £1000 deposit and £250 a month Vs a PCP nissan that's £4000 deposit and £400 a month a lease is by far cheaper, plus that nissan might only be guaranteed a worth of £15k and when it comes to give it back at the end of the PCP it's only got an extra £1000, so you've got £1000 in equity. It all depends on the car. Some are worth fuckall after a couple years.
Thanks for the video! But you are omitting the fact that the monthly lease price often includes (or here in the Netherlands, rather always includes) road tax, insurance and maintenance.
I'll save everyone 17 minutes. In the UK, it's leasing. It's not even close. There are other reasons to finance a car over leasing, but if it's purely about the money, lease is king.
Clearly it isn’t. You’re paying for depreciation on cars that are barely depreciating! It’s hugely more expensive. Might be worth watching before commenting.
@@ElectricVehicleMan I'll admit, I hadn't watched the video before commenting. Having watched it now, there are some truly alarming pieces of advice, some wild assumptions and overall this video is very harmful to consumers. 1) Electric cars depreciate as much as petrol. The idea that these cars will have equity in them in 3 years time is purely a guess and based off of no information whatsoever. The current market is buoyant, yes, but the used car market has already had a book drop and new cars are starting to come back into stock again. Maybe certain brands are still struggling, but overall improvements are being made. It is likely that within 3 years, the situation will be back to normal. 2) The balloon payment is given that value for a reason. The manufacturer/finance company believes that is what the car will be worth at the end of the term. Some manufacturers have different strategies, but saying that "most cars have been in equity for the past 3 years" is totally false. Before this time last year, the majority of cars returning from their PCP agreements were in negative equity. There were some exceptions, but almost all of the cars I took in were worth less than their balloon payment. Some by thousands. 3) You can't compare the lease deal from the manufacturer with the PCP because those aren't the best deals available. You must look at leasing websites which are significantly more competitive. When you do this, you'll notice that the difference is much more stark than the figures shown here. 4) I can't believe that he actually said this out-loud. "Always put your mileage as low a the dealer will allow" this is absolutely NOT what you should do. You should always put the mileage that you expect to do. There is a strong possibility that you will be in negative equity at the end of your agreement. If you do hand the car back to the finance company at the end of the agreement, the excess mileage charge will be higher than if you'd just paid for the mileage upfront as part of the agreement. If you come to the end of the agreement and you haven't done your expected mileage, that lessened mileage will be reflected in the value of the car and so you can recoup it that way. Furthermore, you cannot say that the mileage at the end is "irrelevant" if you don't hand the car back, because as I previously mentioned, the mileage will be reflected in the value of the car, so you will have reduced equity if you go over your mileage allowance. It's like saying "don't worry about damaging the car, because that is only relevant if you hand the car back at the end". It's right to compare them all in this way, but you have to be really careful about your assumptions. The only part which was an accurate comparison was the one between PCP and HP. HP is usually cheaper than PCP over the same term because you're paying off more capital and therefore paying less in interest. However, there are other factors to consider as to why you shouldn't opt for HP. Buying an electric car on HP or with cash is incredibly risky because it offers you no protection. The technology is only at it's infancy. In 3/4 years time, it is possible that electric cars will have moved on significantly with their capabilities. If you don't have the optional final payment to protect you, you could be throwing away £1000's if the car loses a lot of value. If you plan to keep the car for a long time, this doesn't really matter, but if you're looking to trade the car in, buying this way makes no sense. To summarise with reference to my original comment that you disagreed with. Yes, it is possible that PCP or HP could be cheaper for you, but this relies on luck and the evidence of the past 20 years of these products being available suggests that PCP/HP will cost you much more. It does depend on the car and the deal, but if you find the right lease deal they're cheaper in most cases. That said, cost is only one factor to consider. You must remember that with a lease you have no flexibility and should therefore consider if the car will be 100% suitable for the full length of the term before committing. I'm going to post this separately in the comments section because there is a good chance many people could be harmed by the poor advice in this video. Thank you for encouraging me to watch it, I hadn't anticipated it would be this poor.
@@samfcch7898 Cars will not be in negative equity, manufacturers aren’t stupid. My balloon payment for my Model 3 is £18500. Even without the used market it would never be that low. Look at the used market, the evidence is there. Look at new car availability, they’re not being built to affect the used market for years. Everything you’ve said is based on negative equity (where manufacturers lose money). That isn’t even close to reality. Look at the market now and what it will be.
@@ElectricVehicleMan I'm unsure of where the market will be in 3/4 years time at the end of these agreements. The only thing that draws scepticism from your judgement in this case is that you don't seem to be aware of how many manufacturers cars were in negative equity prior Jun '21. I can tell you it was a strong majority. When we get back to normal again, that's where we're likely to be. Manufacturers may not be stupid, but negative equity was the norm. With the rising prices of new cars, the possibility for negative equity increases. Manufacturers rarely loose money even if there is negative equity. This is because dealers are heavily incentivised to renew returning customers. Hence they discount the cars massively and offer additional deposit contributions (in normal times). The cost in this case to the manufacturer is often very little, because they sell the car to the dealer for a fixed price. I agree that, looking at your model 3, you would expect it to be worth more than the £18,500 even if the current market weren't so buoyant. But it's my view that production will have stabilised in the next couple of years. Given that the model 3 was the 2nd most registered car in 2021, and most of those would be on 3/4 years lease/PCP, it means the market is going to be saturated with used model 3's in the near future. Registration volume is one of the key determining factors regarding depreciation. It's why a BMW 3 series will depreciate more than an Audi A4 even though (imo) it's a better car. It's because there's so many BMW's, it drives down the cost and makes the market more competitive. On that basis, and assuming the market stabilises, the £18,500 OFP for your model 3 starts to look pretty generous.. One final word. There was a point when the value of cars skyrocketed where the manufacturer's were caught unawares and were still offering massive discounts, contributions and then huge part exchange valuations on-top. This was a golden period. It's perfectly possible that we're in another golden period now where, in 3/4 years time, the value of cars will still be high and we can make money by selling at the end of the agreement. If that's the case, this will change soon and the manufactures will realise, just as they did with the contribution/discount situation, and they will raise the optional final payments to stay competitive with one-another. In this case, your advice may be correct, but not for long.
@@samfcch7898 The used market can only stabiles with a flood of new cars coming onto the market. Almost everything has a lead time from 6-18 months. They then have to filter into the used market naturally. This isn’t changing for 3-5 years minimum. There isn’t a single EV that’s been in negative equity in the last few years. Not one. As for the model 3, it was one quarter of sales. 6,879 cars. If you order a stock model 3 now, it won’t arrive until between Nov and May. Basic supply and demand, unless there are more than people are wanting, it won’t even out. Given the supply issues of various components, that’s not changing anytime soon.
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Makes me glad I bought my e-Niro First Edition out right on pick up. Cost me £33,000 (after the grant, £3500 at the time). Sold it back to the dealer for £31,800 (in exchange for a MY22 4+). 20 months of use for £60 a month. That's a win in my book.
The dealer got you paying too much on the MY22 :-)
@@stevendegreef93 Nope. Retail with 3 years service, mats, boot liner and the metalic paint alll thrown in for free. (it was a showroom car that had only been in there for 2 days. )
What Andy's figures here didn't include was the 'lost interest' on, in your case, the £33k you might've otherwise had sat in a bank / ISA over the 3 years - obviously, not great interest at the moment, but still should have been included. Albeit on a reducing balance, even at 1.5% interest, that'd be about £500 per year, maybe...?
@@jonathantaylor1998 Only had the car for 20 months. ISA interest would be negligible. Plus my £33k included a £17k part exchange. So effectively £16k cost.
Thanks Andy for a great overview. I recently chose financing - in Germany the rates are so low still, it's almost 0pc. One huge factor against leasing for me was the mileage restriction. 10k km yearly is crazy - it defeats the purpose of having the freedoms of a new car when you have to watch how much you drive it.
I got a PCP ( 3 years) on my Nissan Leaf 40kw Tekna 2019 last year and it cost £19.990. With £5000 deposit it cost me £226 per month. I am very happy with a car, specially when I see the petrol priced at this time.
It's worth pointing out that for many people like myself, we're leasing a car via salary sacrifice. In your example, my costs to down whilst leasing to £11,880. The lease also covers all maintenance and insurance which is another factor. It suddenly makes leasing the best option. There is a slight issue with impact to pension arrangements for some people, but that isn't the case for me.
Very clear way of figuring out which is the cheapest option. I was also worried about the mileage - thanks for clarifying that.
Dry wit combined with an entertaining learning experience makes EVM a great watch.
I've just gone through this and I have moved from leasing after 10 years and gone to PCP. The lease deals are pretty poor at that range and are very close to PCP. Over a 3 or 4 year lease the saving on the lease was less than £1K. Throw in a bunch of manufacturers specials and benefits such as free servicing etc and you may as well take the risk of getting some residual value in the car at the end of the term. In the end the PCP was £500 lower deposit and came in £15 a month cheaper. So there you go, I took a PCP on a Polestar 2 which I believe will have a good amount of money left in it at the end of term. The Whiteboard speaks!
I liked this but I don’t understand why. I felt worse afterwards. What you said, especially about the mileage on a PCP is so bloody obvious, I cannot believe I did not think about it before. I feel like a bit of an idiot now. Thank you for making that so understandable!
Thank you so much for the explanation at the end regarding "Always put the minimum mileage on the PCP"
2019 M3LR.
Got the £35k, 0% Energy Saving Trust loan (Scotland only) and paid balance in cash. Payments under £500 a month over 6 years. Depreciation way less than could ever have been anticipated. Reliability better than anticipated too.
With the fuel savings easily covering the depreciation, it's probably one of the best car financial decisions I ever made and I used to be a proponent of bangernomics.
Without something similar being introduced in England, it's completely unrealistic for the average family to be able to afford a £35-55k car unless offered on 0% finance over 5+ years. So either the government needs to step up, or the manufacturers need to help, to entice people into their lovely (but very expensive EV cars). Would love a #Genesis GV60, maybe I need to move to Scotland ;-) look what you might have started Graham lol...great comment, Ty.
You can make leasing work in some circumstances. Last year you could get a MG5 Long Range at £300 month on a 36 month, no deposit. Came with free insurance, £250 cashback, tethered EVSE home charger and install, plus other freebies like breakdown, dashcam. About £2000 worth. So (300x36)-2000 = £8,800 total cost. I figured the £30k value would be around the £20k region after 3yrs being an old-fashioned shape. £21,200+ then PCP wins. Without all the goodies then PCP wins. Unfortunately these days they have removed most incentives and monthlies have gone up ~£75 on just last year.
Yes only buy 2nd hand, and we buy with credit cards and then transfer balance, interest costs are less than a grand over 5 years. Great video will share!
Good summary and lot to consider. And as pointed out, this does not even go into issues with company owning versus leasing cars and being able to play with operation versus capital expenses tax treatments, etc. But, no matter what one does, with a Tesla you come out great. Here in the US, for many Tesla models it takes over a year between order and delivery. And during that time, the order price of the car will be 20% or more than your order price which Tesla honors.
Gonna buy a New Kia Niro Estate EV, I'm doing PX (but may sell privatly), savings and the cheapest loan I can find, had a pretty solid offer of 3% Apr from AA (dealers usually quote 4.x%) . As you say though there is zero incentive for discounts. Best advice I can give anyone is to save loads and then overpay on any loans as the quicker you reduce the balance the less you pay.
Thanks.
In the states we have the option to buy our leased car at the end of the lease or give it back to the dealer. I lease so if it's to my advantage to buy it at the end of the lease I will, if not I'll get another lease.
Leases cost more but you always drive a new car, never need repairs and don't have a hassle trying to sell your car, especially if you get a dent, so if you can afford it leasing is the best option.
I think terminologies are different in different territories. the PCP in UK would work like that too. Pay the money each month and at the end of the term walk away if you wish, OR pay the final payment and it is yours. You can and some do, refinance the "Baloon" final payment but this is rear as there will probably be a good deal for a new car on offer to tempt you.
One of the key differences is flexibility. I am in the last year of my 3 year lease. Not complaining about what I am paying as it was a good pre-pandemic deal. To get the same car now would cost about 80% more 😱 So I got a quote for extending the lease a year without extending the miles. The lease company would increase the payments by 15% for the 18 months that would then remain. Once you commit to a lease, you are very much in their hands.
Yea, I was surprised he didn't mention the potential of fees for goin over miles unless that's less a problem that side of the puddle. Certainly plenty of people end up fleased here in the states where we logged more miles. IMHO If you can't afford the car straight personal finance on a term shorter than it's warranty you need to save more or buy a cheaper car not look at a lease as an option to get lower costs this month.
@@chublez His reason was, you never hand the car back at the end, you sell it. Only extreme high mileage cars woudl there be an issue of running up short doing that.
Right now, the salary sacrifice thing makes a huge difference for EVs because the BIK rate on an EV is 2%. So you pay the lease with money from salary before income tax and NI is taken, and then pay 2% instead. While that remains the case, it changes the result - especially for people in the 40% tax bracket where it almost halves the lease cost.
The other thing with a lease is I believe they usually come with servicing etc all included - which makes it a bit like renting a car but for a long term. Not that you'd pay £8k for that over three years!
Of course - the BIK rate is set now until end of March 2025 (I think), but who knows what the government will do after that...
Yes and even fuel is in the lease or atleast here it is
Normally two lease options, maintained or unmaintained. I have an unmaintained lease, which is a bit cheaper than a maintained one
however the lease companies have cottoned on so the original price is often inflated. You still save money vs a retail lease, but not nearly as much as you’d expect considering the tax saving
Doesn't salary sacrifice also reduce your pensionable income so your employer will contribute less to your pension which you will also need to take into account
@@Adam-lx4et not necessarily - depends on the lease and your employer. On our case, it doesn't. Our 2021 m3 LR is 400/mo including all insurance tyres and servicing 10k miles py, no deposit.
Playing the game has now enabled me to buy a much more premium car now. Bought a leaf in 2018 for around £30k on pcp with a very low balloon payment. It was the same monthly cost as my Corsa diesel at the time when adding car payment plus fuel cost. Charging for free at work made it a no brainer.
4 years later i have just sold it for £16,400 giving me a nice big deposit for an almost £50k polestar 2, again on PCP. Didn't get a tesla as insurance is too expensive to include my mrs with her provisional licence (£3k). Also the pcp isn't as competitive as offered by polestar (balloon payment is low). I will be paying £50 less a month than I currently do on my leaf.
How much per month?
Less skill playing this game and more luck right? You know the balloon payment is based on assumed depreciation. It’s generally not a perk of the deal.
Great explanation!, Im always saying that when someone ask me about the pcp and picking the right car with the right options extras etc sometimes make a good difference 😎
Great explanation of the options. I disagree that if you go with PCP you should select the lowest mileage. If you intend to pay the balloon payment at the end, the lowest overall cost option is often to put the highest mileage possible. The monthly payments will be high and the balloon payment much lower but add it all together and the total amount is normally slightly less than going with very low mileage. It all depends on whether you want to pay more per month and less at the end, or the other way round.
Good advice, and an easy thing to calculate by playing with the options.
Excellent video. 6 months on, I think the market has adjusted a bit. I have just compared a number of lease and PCP deals on a Kia Niro EV. Based on expected depreciation of the Niro (39% reduction in value in 3 years according to Autocar and other sources) and leasing is now somewhat cheaper than PCP. This delta is magnified a bit for company car buyers (50% VAT reclaim and tax relief). I still learned a lot from this video - perhaps an update would be worth doing?
Another insightful vid. I've done the same calculations but with my works Salary Sacrifice (SalSac) scheme which is difficult to depicte as you have in the comments but essentially for a Model Y LR on a 3 year term:
Total Asset cost:
Tesla Loan = £22,273
Tesla PCP = £24,274
SalSac = £19,318
I used 30% depreciation which was close to your 31% (asset £40,663 after 3 Yr) as you said obviously this could be more unlikely less.
The tax saving you get through SalSac makes it very attractive, though worth noting the amount of saving differs depending on your Tax banding (above calc done as Higher Tax payer)
Also forgot to add that SalSac includes all servicing, replacement tyres, breakdown cover and insurance, never had PCP or Loan so don't know if theyre also included?
With salary sacrifice you also need to consider any impact to your pension contributions and the cost of any top you you might wish to do to ensure your pension is not affected.
@@edbarrow816 pcp no loan no
@@sammyb304 depends on the tax band. 20 % it's a no brainer doesn't really effect contibutions
@@damiendye6623 Well it kinda depends on how high the employer contributions are, how long you lease for, whether you are on a final salary scheme or career average. The impact of all that needs to be considered so individuals can determine if the impact is significant or not. These SalSac schemes promote the net deduction and if that is all you look at, you could be in for a shock if you end up leasing through SalSac for 20-30 years of your career.
The best detailed explanation I saw, thanks mate
Thank you Andy. You've helped me to demystify the options.
Great video thank you. I did all these maths when getting my Kona EV mid pandemic.
I went for lease, I appreciate we are in uncertain depreciation times that favour PCP but this hasn't always been the case. I used to hate watching my cars depreciate and losing my asset. I like that it's not my car if it goes wrong (accepting all cars have warranty) and depreciation isn't my worry. That said it was £300/m with 3m deposit over 2yrs. Those deals are non existent now but at a 34k car quite a bit cheaper to lease than Tesla.
Also no interest is added onto a PCH, the dealer PCP interest added several grand .
In 18 months time with the market the way it is I will either extend lease or PCP/HP. No way I'd pay £450-500 a month for a small EV.
I managed to lease an Ioniq 38 Premium SE for £217 (VAT inclusive) including servicing and tyres in July 21. I had a choice of colours as well, but the crazy thing was that if I had gone into a Hyundai dealer the same car would have been £474 for 12K over 2 years. That is with one month down. The even crazier part is that it is via Hyundai leasing, but through a 3rd party. If I had gone for a 3 year lease, it would have been £317 a month.
When I leased in 2016 I had a B8 Passat GT estate and the VW leasing guy showed me the figures, car with metallic OTR £29675, VW would sell the car to VWFS for £23500. Lease then done on that value. To lease was 3/35 x£335, PCP was 6/35 £374.
So you are paying something for something you'll never own.
Waste of money... Your lease cost you £7,200 and you have nothing to show for it.
I spent £1500 on my vehicle 14 years ago... My total spend on repairs in 14 years has been £700
@@sahhull you are probably watching the wrong channel then my friend unless you are driving a milkfloat or a segway
It’s worth pointing out that the PCP balloon payments in a normal market are calculated to essentially be slightly under the value of the car at end of deal assuming mileage limits. If you put a deposit in, in normal times you don’t get that back. If you think about these finance companies they aren’t planning to let you buy a car for £19K worth £30K. So when doing these comparisons safest is to add on 5-10% of residual as asset value. And that is how pcps are designed to work. Sure the inflated market is crazy now but dangerous to assume it will be that way in a few years. Second hand prices already coming down month on month. Leasing in a normal market is usually cheapest in total cost.
I am currently looking at a 2021 Renault Capture £12750. A deposit of £5000 for PCP monthly payments £124.47 x 48 months, total payable including option to buy £15328.59. On HP same deposit monthly payment £197.85 x 48 months total payable £14506.80. Between the two agreements that’s a difference of £821.79. That makes PCP more expensive than HP which is a rip off. Other cars I’ve looked at similar price with difference between PCP & HP £1000-£1500. In my own area I’ve found that car dealers prefer you get the car with PCP instead of HP,on their websites very few give quotes for HP. I am sure that’s the situation everywhere else.
Love the "Whiteboard of Truth"...!
And, your added 'clothing explanation' note on the Intro... just hilarious...!
Anyhow, I was actually quite 'pleasantly' surprised that there was only about £1,500 total cost difference between HP and PCP.
I think, on that basis, I'd be tempted to take the PCP option simply for the added protection in case the bottom dropped out of the used-car market during the time period...?
Plus, then the extra £483 difference per month could be put aside in a 'high-interest' account / ISA to offset that difference a little, too...
Excellent video, well presented!! Love the whiteboard. Cheers!!
Looked at these options and went for hp over 4 years. Wanting to keep the car it worked out more a month to put money aside for the money owed in a pcp. Lease too much money
Great video btw
Thanks so much for this. Very helpful indeed!
Thanks for the video. That's how it should be (buying is cheapest but more upfront is needed) however whilst it might be easy for a Tesla, it's often not so easy to work out for many others. The discounts that were available with PCP, the fact that some lease companies but not others allow you to buy at the end (but without a guaranteed price) and the mileage constraints (who knew lockdown was coming) make it all a bit of a lottery sometimes.
I ended up with a 3 year PCP because:
1) I didn't quite have £100k to buy it outright
2) I didn't want to put down the 50% deposit needed for manufacturer HP
3) The bank wanted an insane interest rate if I borrowed more than £30k
4) I got about 10% off for financing PCP
5) I just didn't fancy a lease where I might not be able to buy later
6) BiK (non-EV) was stupid if I went through the company
2 years on I thought I was going to hand it back at the end because values weren't great. Then pandemic. The value shot up and I paid the GMV. In retrospect, PCP turned out to be the best value by far. I thought it was going to be slightly more expensive than buying outright.
I guess I got lucky. I still have the car now and plan to keep it.
The TCO is not sexy for the folks. Sticker shock scares the crap outta them and then they don't want to deal with the up front cost. My SR plus has gone up in value over the 2 years I've had it and my friends who succumbed to my free test drives who then bought one are now delighted with the value of their cars being a lot higher than what they paid. As of yet I have not received any commission from them. You add in the fuel cost savings and it starts to get embarrassing. I talk about TCO and it looks like I'm showing off... Good videos man
Great video. Really helped me. Was about to sign a lease. Rethinking now
Well done for doing these sums (and pointing out that 'not finance' is always the best deal if you have the money). I've never bought a car I have to get finance on and don't intend to start now, even though I am looking at a very expensive ID Buzz Cargo or Arrival van next.
So this just popped up in my feed , its a year old in 2024,and one year later, models 3's at3 years old are about £10k cheaper than guesstimated here. Looks like the cliff occurred.
Exactly this, before he put the figure in I was guessing 20k when he put 32k I laughed, actually I don't know the value I can't be bothered to check, but if your saying 22k I was close, ev residuals have plummeted
It mostly depends on if it's a personal or business vehicle and on how long you intend of keeping your vehicle. With leasing you will be be paying every year for the rest of your life. If you keep your car a long time leasing is daft if you like to change your car every year or so finance is daft . With ICE cars I used to pay finance over a few years then get a few years no payment before selling it and starting again.
Very interesting, as a fellow Yorkshireman. 👍
Nothing beats waking up to watch Man Maths that make more sense than what I learned at school.
I went down the rabbit hole when it came to leasing my Kia E Niro. I will look at ending my lease at 50%, only problem is the long lead time for a new EV. Hopefully by 2024 the delivery times will have improved.
First of all thanks for this video. It's very relevant to me right now as I'm trying to figure out if I can afford to get an electric. Not sure we have the PCP option in Sweden but I'm very interested in finding out now. Going to some dealerships on monday.
And I think that after 3 years, that £46k Tesla is probably worth at least £30k. Impossible to say what will happen in the next 3 years of course but so far they have held their value incredibly well.
This has convinced me to keep my old petrol car as it only costs me £85 a month in petrol even at these high prices , I’m just going to run it til it dies , no way I can afford those monthly repayments for an EV
What are you going to do when it finally dies?
@@ItsAllJustBollox it’s 8 years old so will keep it going until it’s 20 years old , I’ll be dead by then
This is for a brand new Tesla, not really comparable to an old car.
@@Sthilboy56 My almost 12 y.o. Accord and 11 y.o. CT200h are still rock solid.
How do you know your death year haha?
@@ElectricVehicleMan just because it’s old doesn’t mean you throw it away and get new
The collapse of three year old Tesla model 3 trade in has been dramatic. Without the benefit of hindsight your reasonable assumptions, 2 years ago, of trade in value is now more likely to be £21.5 k. Ouch!
What a fantastic video! thanks for that, I had no idea that changing the miles driven would make such an impact. But I've just tried out an experiment on a Kia EV6 PCP, and seem to get the opposite result! If I declare 6k miles/year, with a £25k deposit, I pay £186/month, but the balloon payment is £25k, with £5359 interest to pay.
If I declare 30k miles per year, my monthly payment shoots up to £393 but the balloon payment shrinks to just £17k with interest payments of £4540 -- over £800 saving! Now, the monthly payments may end up eye-watering, but overall, this comes with a substantial saving. I wonder why this is different to your Tesla example? May be worth warning people that not all PCPs are the same.
hi John which company did you find this deal? i am looking for business pcp kia ev6
@@wanistani I looked it up on the Kia UK finance tool and played with the inputs to see what it gave me.
If you can get something new reasonably quickly if you have a personal lease it’s worth talking to your lease provider. At the moment Kia are happy to take our Soul back after 14 months and not charge me 50% of the remaining payments (as is the usual common practice and in the terms for the lease) because they can make more on flipping it that the relatively good terms I leased the car on (1+35, 8,000 miles per annum £310 per month) over the remaining 21 months. I’m currently considering getting a new Niro to replace it on a loan / pcp as I have a get out of jail free card
Thanks for this it is very useful. There are always exceptions and some golden deals can be had. I always bought my cars and owned them afterwards. I had a deposit down on a Tesla model 3 and pulled it in 2018 as I had an unbelievable deal for a car worth around £38K on a 30 month lease. In my case a manufacturer offered a very limited number of Volvo S90 D4 Model R for £220 a month (+ £2K down) and I wanted to bite the hand off the person who offered it to me. This was cheaper than when I bought a 3 year old Jaguar Model S 3.0 Diesel. I was very very lucky and got to drive a car that was brand new and I enjoyed the new car feeling when I got it. As I was never able to buy a brand new car this was my first new car and a very up market one to have that, to have the experience with. I thank my lucky stars that Volvo chose to clear it's 2018 diesel stocks of S90 early so it could offer it's 2019 spec cars earlier. The 2019 models had ad-blue so were much greener. I wish everyone luck in finding a very advantageous deal when they look for a car. Good luck everyone.
As a high mileage user I get pcp's for the 1st 2 years then buy it out with an unsecured loan that falls in the sweet spot which is what I have just done with my zs ev, I now have the freedom to make a choice now
Fantastic video, informative and precise.
Here in the Netherlands a private lease is classed (and registered) as a personal loan, though the lease companies prefer to keep that quite.
This can have an adverse (massive) effect on the size of mortgage you can get if you intend to buy a house and for some people that comes as a shock.
And as one German viewer mentioned, the lease price only 'looks' attractive if you drive 10,000km per year, or less.
Interestingly, 3 year old model 3's are selling for around £45-50k depending on mileage 😱
The only problem being when you come to sell you have to wait 6-12 months for a new car or buy an inflated used car which I guess all becomes relative to some extent.
Great video 👍🏻
Thats £43 - £48k more than Im willing to spend on a vehicle
My LEAF is £127 per month! 2 year lease with 3K deposit. I know that was good but it has proved the the LEAF is the right car and I have ordered a new one for delivery next year. It was an expensive test but proved the viability of an EV for me...
But you're £6000 in the whole for something you don't own
Bought my 3 month 71 plate and 700 mile old leaf tekna 40kwh in January for £25k paid in full WBAC are offering £24865 with 5500 miles on it today.
Cheap motoring especially as I charge at work for free.
Thanks Andy, the one thing you forgot to add in was the mileage, the agreed mileage can have a big impact on a lease, and usually the reason I have avoided them.
There's another very important factor though: Opportunity cost. How great that is depends on where you live, but for example here in Sweden, you're only allowed to borrow 80% of the purchase price, so you must pay a 20% down payment. Combine that with the higher monthly costs and compare to not paying anything at all upfront for the lease and you have *a lot* of money that's not generating income for you trough investing. At 10% per year, that downpayment would have grown by 33%.
PCP seems like a pretty great middle ground, but I've never seen that offered here.
Interesting where 10% investment schemes can be found these days
Couldn't agree more. Why do people not research finance options. That is why banks are so rich.
I use to do PCP, but when got my e-Niro went with a 3 year lease, worked out same price as my PCP. Why I like lease on EVs is tech is changing so quickly, I do not need to worry about being left with a paperweight at the end of it.
10 year old Nissan Leafs are going for a lot of money still. A car is a car. Tech doesn't make one obsolete and never will.
A new BMW M3 (with new engines/tech) doesn't make the old M3 useless.
They're cars, not laptops.
good video, in this scenario, i'd go with the loan rather than buying with cash, invest the 46k you have lying around , a return as low as 2% pa would make it cheaper than cash, (I'm not a financial advisor)
After the total cost, you can go to the total cost of ownership. With the lease the insurance, road taxes, 'side road help' or however you call it. All that is included.
For the other ones you have to add these. Then the cost of ownership can be very different in some situations. Because you're $703 per month, becomes $850 very quick. And that is without maintainence.
These don’t.
Just had an interesting meeting at a dealership, where they tried to sell me a PCP deal, not a car. What happened to the salesman that asked what you used a car for, who travelled in it, how often you changed it, what annual mileage you did and what your typical journeys look like? Interest charge over 5 years was >£5k and no discount against list price because they could sell every car allocated to them. The interest cost on a PCP is calculated on the OTR price less your deposit, so on a £40k car with 10%, you will pay interest on £36k over 3 or 4 years but because you do not amortise the loan to zero, that will add up to a lot of interest unless you can find 0%. Yes, the capital repayments in isolation are low, allowing for the GMFV, but it is still your hard-earned cash going into the finance Co.’s coffers when you also have to pay the interest. The APR is critical and consider HP or an unsecured personal loan over a longer period. Look at the total cost in the quote. I found a dealer further afield willing to offer a discount and I will buy for cash so saving the interest (but losing credit interest on my savings, which remains a joke).
I still went for PCH for my car as I know exactly how much it’s going to cost me (£5k/ year) and I’ve never sold a high price car privately, makes me nervous being scammed.
It’s a shame that used car prices have dropped like stone, so PCP might not be cheaper as interest rate is now really high & if on PCP. You hand the car back a bit like lease
Just to add many Lease options let you ‘buy ‘the car at the end of term, agree its down to them how they value it but there is at least a possibility the figure could be comparable to PCP.I got my model 3 via Lex Auto lease on a PCH, i cannot buy the car myself as there are tax regulations but they will gladly sell it to a partner/family member so effectively i keep the car.
We're currently leasing a Model 3 SR+ but it's a 4 year lease, 8k miles per year, £425/m through a third party leasing company. Telsa were about £100/month more for the same lease period so it's worth shopping around for a better price. To be fair we needed to keep the monthly price down and the purchase options from Tesla were just too expensive.
This is a great intro for car finance. I bought my car HP - one advantage you don't mention is that you can pay extra, end it early, and save some interest.
Has the Driving Ohm podcast address changed or something - none have popped up in my podcast app for a while.
It’ll be back soon.
I know you stated it as a big unknown but the last three months car sales are down on used market so there is pressure already to lower prices, so not sure I would be confident in saying prices will remain high for 3-4 years.
Also as already mentioned by a few others if your going to buy the PCP put mileage as high as you can that way you will save on interest if you go full term so with Tesla you will pay £300 less that way.
Same mindset on savings you didn't cover potential to haggle with PCP and HP - whilst there are less deals out there, if you can find it cheaper than OTR price you should be able to get a PCP on the deal price as such - so for example £2500 off a Mokka e currently is an option.
With a lease Im not sure of the benefit of front loading as such cost I would always load it other way smallest deposit so 1x or 3x as that way if you want out mid term you only pay half the monthly payment which would of been paid upfront if loaded and that's then not returnable. Overall payment over term doing this is normally a few quid difference.
Finally leases are not as good as they used to be so for sure you need to check don't assume like you said - Ioniq old model is the only car I could find that had 4 year old models for sale and still available and that was a lot closer call with PCP v Lease 2k saving again with the risk prices fall.
One of the few benefits of disability: Motability - they are such a large fleet that their lease costs are insanely good value.
I have just taken delivery of a BMW iX40 on a lease. I crunched all the numbers and could not get a PCP or HP deal to anything like the same value.
A PCP would have cost £280 pm more and would have required a £12,000 deposit on the same 10,000 mile a year, 4 year deal.
My previous car (an X5) was a 4 year pcp and the lease deals were a lot more costly than a pcp when I got this car. A bonus was the £8,000 profit in buying the car on the final payment and selling myself! However, previous pcp deals have only ever broken even, so I think the profit this time is just circumstantial and I think the value of your Tesla is inflated substantially in the current (temporary 🤔) market, so I think the notion of any profit in 4 years time is likely to be flawed.
Of course, I may be wrong, but £12,000 up front and 48 x £280 a month is what a pcp would cost me above the lease… what are the chances any value above the £25,000 of additional outlay the pcp would take?
I also think my impressively high tech car might seem more dated than the past experience with electric car and battery tech moving so quickly. Will my 260 mile range suddenly seem ho-hum with potentially sub £40k 4680 teslas doing 400 miles?
All in all, I love your content, so this is not a criticism, it is more reaffirming your own contention that everyone needs to crunch their own numbers and make the choice that suits them!
Keep up the good work! I love your solar and home battery content too! 👍
Very interesting video, even though I live in Canada! One comment about buying for cash, though: if one can afford to pay cash, it's worth looking at the financing options anyway, because it's possible that investing the money would yield a higher return than the money saved on finance interest.
This is certainly the case in North America. I don't know if its still being offered but polestar were offering 0% on their cars. Fabulous deal if the car works for you.
Over what period of time? In this market you might be waiting a while.
@@kj_H65f That’s a good point, and obviously something that one must consider when deciding. But even a paltry 1% interest compounded over 3 or 4 years will be a win if one can get 0% financing on the car.
I would say that there is some risk in severely (>5k miles/year) under stating your annual mileage on a PCP. The balloon payment at the end of term is a guaranteed future value which is based on the mileage you stated. That’s not going to stop a dealer wanting to get you into a new car but does give them a tool to use in negotiation. Having said that the contract should clearly state a cost per mile over the limit and they are usually quite reasonable ~7p mile I think mine is which is only £1,050 for 15,000 miles over. As you say - do the maths yourself it’s equivalent to you paying yourself to do the maths by the amount you save!
That only applies if handing it back to the finance company, not trading it in at the dealer. They’ll give you what it’s worth on the market.
@@ElectricVehicleMan yes they will but the market value will also be based on the mileage it has done. The same car with 15,000 miles more on the clock will be worth less than a car with 15,000 miles less. I guess my point is don’t think that you will save money by putting less mileage down for your PCP. At the moment it is completely crazy though so you’re getting well over the normal price on everything - high mileage or not.
@@olski001 if you're keeping the car they don't take into account the mileage if you go over, because it's not their problem. If you chose to give the car back and it has more miles than you specified, only then do they calculate an excess mileage charge.
It's interesting watching this 9 months later because prices have sort of gone off a cliff mostly thanks to Tesla doing their big price cuts in January. It's great news for people trying to get into EVs or trying to get into a better EV that was previously way out of reach. Unfortunately intrest rates over the past 9 months have gone the other way, crazyily high compared to what we've been used to. Perhaps this video needs an update. I'm sure the final answer will probably be the same but the figures will be vastly different.
One big issue with your comparison, never ever, get a lease direct from dealers. It's no wonder the lease one came out bad, the RRP of new vehicles doesn't change much from dealer to dealer, but lease deals certainly do.
eg. My last lease was an A250, cost new about £31,700, So a 3 year loan @9.9% would cost about £1K per month, after 3 years the car was about £22,000, so total cost for 3 years = 36 - 22 = £14,000. This same car I leased for 15K miles, 3 + 35 =@ £300pm = £11,400. But the main benefit from my POV, its just way less hassle, having to sell your old, buy a replacement, and if you use dealer getting a really bad price for your old car etc.
My current car EV, I've also leased, but the calculation get a bit more complicated from going via company, due to BIK, VAT & TAX reasons. Put simply, there is no way I would have been able to afford it using PCP etc.
Interesting but you have to consider that to make the greatest savings you have to tie up more of your capital. Therefore you'd save the most money if you bought the car outright 😁
Just considering buying either a Honda e, 2 years old, 10.000km run, €36.500 at Honda, or a Model 3 SR+, 4.000km run, 4 months old (made in china, LFP battery, basic autopilot, black color), €55.000. I can afford a down payment of €30.000 and would HP the rest. Although i love the Honda e to bits, in terms of looks, size, and design inside and outside (which is kinda redundant), it looks like the Tesla is the better choice, although it is actually a bit more expensive than new. But new Teslas can be delivered in 12 months, so that is not an option as i need a car now.
I do not like the outside looks of the Tesla, do not particularly like the centralized iPad (but like the general user interface). And of course there is the tiny but very annoying issue that my spot in the parking garage is on the lowest level (-4) and it is extremely tight to drive down and up, basically requiring a 3 point turn at each ramp. Which the Honda can probably do without the 3 point turn as its turning circle is tiny. But of course the charging network, long range possibility (living in both Porto and Berlin might make it necessary to drive at times) and a lot more space in the cabin are the plus side of the Tesla.
Decisions, decisions.
Very well explained and interesting video.
Thanks for the great content, could you do a leasing comparison for leasing an EV through a small Ltd company for a lower rate tax payer? thanks
We bought an ioniq5. Went to the Hyundai dealer. Dropped just under 50k can’t be bothered with owing companies. & that car is ours.
Dealer was saying see you in 3 years. I was saying yeah yeah. See you in 10 years.
I am not giving up my car. It will see me nicely into retirement.
On higher value cars, the drop is a lot bigger. So Lease vs PCP almost the same and you may as well buy a house if you are going to get a 100k+ loan. Plus, what if you get a lemon that will not sell? Double whammy. The higher lease cost is the ‘insurance’ that says I do not have to worry if indeed it is a lemon.
Great Video! Thanks Add it to my playlist Ev Review! 👍🏽⭐
Interesting. My understanding is the final PCP balloon payment is what the manufacturer considers to be the final depreciated value of the car.
Before second hand car prices went up if a car was worth 40% of its new cost at 3 years old then you were doing well.
I’m one year into a 3 year lease of an ICE vehicle. It cost 20,000 and was forecast to be worth £8,000 after 3 years. So the depreciation is £12,000. My total lease cost is £8,000 so I think at the time I made the right decision. Not sure I’ll do the same in 2 years though.
With regards EVs. If there is a revolution in battery composition resulting in lower cost and/or better range then current EV’s will plummet in value. That’s why many people are leasing EVs and not buying outright at the moment. You’re insuring yourself against progress making your car worth considerably less after 3 years
Never understood the leasing!
I have looked at it a few times, but even without something like this, it always seemed pretty obvious to be that it was a dumb option!
Mostly you have to pay around the same pr. month, but you don't have any asset in the end of the lease!
It is like renting a house vs buying it! You pay a lot, and have nothing to show for it after!
Only upside of leasing to me is that you can easier upgrade and change to newer cars. since, as you said, you are probably no going to run a loan for only 3 years!
Is it time to do an update on these figures as there are now Tesla model 3 standard range plus three years old for 19 to 25k?
In all the lease deals I have ever seen, the monthly payment is only less than the PCP payment if you pay a much larger deposit.
All the arguments in favour of lease assume the car will be worth less than the balloon payment, the car is going back to the finance company and this is the last car they will ever need so they don't need any future asset.
Doesn't matter what it is, leasing is always more expensive as you'll never have anything to show for the money paid at the end of the deal.
Another key thing with PCP is that you can settle the finance early, more flexible than a lease in that respect.
Who are these people that can afford (Lease pch) £6,708 a year + £6k deposit and have nothing to show for it after 3 years? When for an extra £1,728 a year you get a £32,000 car after 3 years. Its not like these people are skint paying £6,708 a year to rent a car, my mind is blown.
Very true and don't get me wrong, I agree it's a false economy currently to PCH, but there may be those that can't generate the £19k to buy the car at the end of the term in this example to realise the £32k 'asset'. Having said that, in the £6708/year to rent a car case, one would hope they could generate the finance to purchase from the finance company at the end of the term on PCP...
Unless you’re not bothered about actually owning the car and want to get another one at the end of your lease period. EVs more than any other car are getting better & offering more, so if you lease for 4 years, you’ll be looking to get something better next time around (greater mileage, more accessories etc).
Ultimately, it’s all about affordability & if it gets someone in an EV, that’s always a good thing (unless they’re stopping me from public charging next time I need to 😂)
It's ironic that someone that can't afford to buy a £45000 car outright, can afford to throw away £25000 and have nothing at the end of it. Completely dead money just pissed away
Depends how much you are prepared to lose. Other than this strange times, new car depreciation is horrific. Some people are comfortable with an asset losing half its value in a couple of years (traditional depreciation). Others will want peace of mind on total cost over a period of time, not to own the asset and give it back.
It's no difference to buying a mobile phone. I don't know why more people don't buy the handset upfront and SIM only on a MVNO instead of committing to the big players for 2 years. Horses for courses
@@danpaul4975 If you bought a £45,000 car what do you think it will be worth after 3 years? Sure you have the car (an asset) but it’s not worth £45,000. You’ve ‘pissed away’ whatever the depreciation is
Finally somebody who sings my tune.
Bank loan for 20k at 250 a month, 8k part ex of old car - Tesla model s facelift 50k miles facelift. And the 250 a month saved on oil funds the loan. Thoughts?
Even happier I got my 6y 0% EST loan for my Model 3 😁
Thanks, really useful. For the first time ever we're looking at buying new given the crazy second hand market. The point about excess mileage on PCP had completely passed me by so that you for that (have previously bought second hand for cash). Also re your point about sallery sacrifice not stacking up, our other car (Soul EV) is a company car through my work and is for now ahead of having gone another route, no idea if that will be true for another one in 30 months time when it needs replacing though. Keep up the excellent content, it's largely due to your videos we got our first EV 18 months ago and now we're heading towards having two!
Current 3 year old SR+ are on auto trader for £39k (insane)
Leasing a couple years ago used to be vastly cheaper, you had to hunt for the deals (over stock) and most cars had at least 50% depreciation after 3 years. With a good deal it could have been 20-30% cheaper total cost of ownership to lease, far less than the depreciation on the car alone.
Now there’s no stock so no massively discounted rates for leasing (years back I was offered a new £85k BMW M5 for £550 a month lease 3/24) and second hand prices are super high (especially Tesla’s) so PCP can be good, if the balloon payment has not been raised excessively. Also watch the total amount of interest you pay on any finance, dealers especially tesla who are rarely cheap.
Also watch who you P/X your car against, Evansville Halshaw paid 8k more than Tesla for my Mercedes (pre stupid prices)
Three year old Tesla model 3 standard plus is £21,000, these days. Who would have thunk.
Not with average mileage.
Very interesting, thanks
£32k 😂 that was optimistic
great video - thanks
Well this is very intereting to watch NOW, with used EV prices absolutely plummeting... I am actually looking at a used Model 3 Long Range about 2-3 years old, for $25k or less, and the mileage isnt terrible; I've seen anywhere from high 20k's to low 40k's.
With that said, you would still be on top if you bought and financed $46k and the car is now worth $25k vs leasing, which is crazy 🤣
For reference Im in USA, but the prices are quite similar in this comparison, just for a Long Range MP3 instead of Standard.
Good comparison, thanks… when I got my E-Niro in 2019 I went with lease to make it affordable and wash its face against previous 130000 mile Mondeo and make it affordable; did the math but didn’t see the future 2nd hand market or the effect of the Pandemic and so on. So you live and learn, I will definitely consider the other options when the lease runs out but we have to consider monthly affordability as well. TBH the market is bonkers and that’s the real problem! Can you have a word EVM? 😁
Had a cheap ish on pcp. Final payment £3500. Sold privately 2 years later for 4800. Before you say blar blar prices have gone up . That was in 2017. Never hand car over!! Incidentally VW offered me 2800. How I laughed.
Cheapest 3yr old Tesla Model 3 standard on Autotrader as I type 10/06/2022 17:35 - £34,950. So £32k is a low estimate. These figures are valid.
Great watching it back but it has aged a lot. I suspect the current value of the discussed car is around £25k, which makes all 3 options very close at the moment… I am very happy we went the leasing way on the Tesla as the prices went down through the floor!
For a higher or top rate tax payer, salary sacrifice lease still does make sense (is it right that high earners are getting subsidised to buy their Taycan's... probabably not!). Are the lease companies overcharging for depreciation and pocketing some of the tax savings for themselves? Absolutely. Do I wish that I could get the tax savings whilst actually being charged a fair headline lease price with realistic depreciation? Yes. But when I did the calculations the car (in my case Model Y) would have to retain 80% of it's value after 3 years / 36000 miles to make it cheaper to buy on finance. That's I think budgeting on the low side for insurance/tyres/breakdown cover etc that are included in the lease. I think it's not impossible that the Model Y is worth 80% after 3 years, but it's far from certain. My own personal expectation is more like 65%. I'm hoping the market normalises a bit and the lease company will let me buy the car from them at a reasonable cost (but not holding my breath) There are also some secondary benefits like having the weight of the lease company to sort out any problems if there are any
It depends on the car aswell, it's alright making these comparisons with teslas but when you can lease a Nissan for £1000 deposit and £250 a month Vs a PCP nissan that's £4000 deposit and £400 a month a lease is by far cheaper, plus that nissan might only be guaranteed a worth of £15k and when it comes to give it back at the end of the PCP it's only got an extra £1000, so you've got £1000 in equity. It all depends on the car. Some are worth fuckall after a couple years.
Thanks for the video! But you are omitting the fact that the monthly lease price often includes (or here in the Netherlands, rather always includes) road tax, insurance and maintenance.
It doesn’t in this example.
That’s why everyone needs to do their own figures too. Many variables.
I'll save everyone 17 minutes. In the UK, it's leasing. It's not even close. There are other reasons to finance a car over leasing, but if it's purely about the money, lease is king.
Clearly it isn’t.
You’re paying for depreciation on cars that are barely depreciating! It’s hugely more expensive.
Might be worth watching before commenting.
@@ElectricVehicleMan I'll admit, I hadn't watched the video before commenting. Having watched it now, there are some truly alarming pieces of advice, some wild assumptions and overall this video is very harmful to consumers.
1) Electric cars depreciate as much as petrol. The idea that these cars will have equity in them in 3 years time is purely a guess and based off of no information whatsoever. The current market is buoyant, yes, but the used car market has already had a book drop and new cars are starting to come back into stock again. Maybe certain brands are still struggling, but overall improvements are being made. It is likely that within 3 years, the situation will be back to normal.
2) The balloon payment is given that value for a reason. The manufacturer/finance company believes that is what the car will be worth at the end of the term. Some manufacturers have different strategies, but saying that "most cars have been in equity for the past 3 years" is totally false. Before this time last year, the majority of cars returning from their PCP agreements were in negative equity. There were some exceptions, but almost all of the cars I took in were worth less than their balloon payment. Some by thousands.
3) You can't compare the lease deal from the manufacturer with the PCP because those aren't the best deals available. You must look at leasing websites which are significantly more competitive. When you do this, you'll notice that the difference is much more stark than the figures shown here.
4) I can't believe that he actually said this out-loud. "Always put your mileage as low a the dealer will allow" this is absolutely NOT what you should do. You should always put the mileage that you expect to do. There is a strong possibility that you will be in negative equity at the end of your agreement. If you do hand the car back to the finance company at the end of the agreement, the excess mileage charge will be higher than if you'd just paid for the mileage upfront as part of the agreement. If you come to the end of the agreement and you haven't done your expected mileage, that lessened mileage will be reflected in the value of the car and so you can recoup it that way. Furthermore, you cannot say that the mileage at the end is "irrelevant" if you don't hand the car back, because as I previously mentioned, the mileage will be reflected in the value of the car, so you will have reduced equity if you go over your mileage allowance. It's like saying "don't worry about damaging the car, because that is only relevant if you hand the car back at the end".
It's right to compare them all in this way, but you have to be really careful about your assumptions. The only part which was an accurate comparison was the one between PCP and HP. HP is usually cheaper than PCP over the same term because you're paying off more capital and therefore paying less in interest. However, there are other factors to consider as to why you shouldn't opt for HP.
Buying an electric car on HP or with cash is incredibly risky because it offers you no protection. The technology is only at it's infancy. In 3/4 years time, it is possible that electric cars will have moved on significantly with their capabilities. If you don't have the optional final payment to protect you, you could be throwing away £1000's if the car loses a lot of value. If you plan to keep the car for a long time, this doesn't really matter, but if you're looking to trade the car in, buying this way makes no sense.
To summarise with reference to my original comment that you disagreed with. Yes, it is possible that PCP or HP could be cheaper for you, but this relies on luck and the evidence of the past 20 years of these products being available suggests that PCP/HP will cost you much more. It does depend on the car and the deal, but if you find the right lease deal they're cheaper in most cases. That said, cost is only one factor to consider. You must remember that with a lease you have no flexibility and should therefore consider if the car will be 100% suitable for the full length of the term before committing.
I'm going to post this separately in the comments section because there is a good chance many people could be harmed by the poor advice in this video. Thank you for encouraging me to watch it, I hadn't anticipated it would be this poor.
@@samfcch7898 Cars will not be in negative equity, manufacturers aren’t stupid.
My balloon payment for my Model 3 is £18500. Even without the used market it would never be that low.
Look at the used market, the evidence is there. Look at new car availability, they’re not being built to affect the used market for years.
Everything you’ve said is based on negative equity (where manufacturers lose money). That isn’t even close to reality. Look at the market now and what it will be.
@@ElectricVehicleMan I'm unsure of where the market will be in 3/4 years time at the end of these agreements. The only thing that draws scepticism from your judgement in this case is that you don't seem to be aware of how many manufacturers cars were in negative equity prior Jun '21. I can tell you it was a strong majority. When we get back to normal again, that's where we're likely to be. Manufacturers may not be stupid, but negative equity was the norm. With the rising prices of new cars, the possibility for negative equity increases. Manufacturers rarely loose money even if there is negative equity. This is because dealers are heavily incentivised to renew returning customers. Hence they discount the cars massively and offer additional deposit contributions (in normal times). The cost in this case to the manufacturer is often very little, because they sell the car to the dealer for a fixed price.
I agree that, looking at your model 3, you would expect it to be worth more than the £18,500 even if the current market weren't so buoyant. But it's my view that production will have stabilised in the next couple of years. Given that the model 3 was the 2nd most registered car in 2021, and most of those would be on 3/4 years lease/PCP, it means the market is going to be saturated with used model 3's in the near future. Registration volume is one of the key determining factors regarding depreciation. It's why a BMW 3 series will depreciate more than an Audi A4 even though (imo) it's a better car. It's because there's so many BMW's, it drives down the cost and makes the market more competitive. On that basis, and assuming the market stabilises, the £18,500 OFP for your model 3 starts to look pretty generous..
One final word. There was a point when the value of cars skyrocketed where the manufacturer's were caught unawares and were still offering massive discounts, contributions and then huge part exchange valuations on-top. This was a golden period. It's perfectly possible that we're in another golden period now where, in 3/4 years time, the value of cars will still be high and we can make money by selling at the end of the agreement. If that's the case, this will change soon and the manufactures will realise, just as they did with the contribution/discount situation, and they will raise the optional final payments to stay competitive with one-another. In this case, your advice may be correct, but not for long.
@@samfcch7898 The used market can only stabiles with a flood of new cars coming onto the market. Almost everything has a lead time from 6-18 months. They then have to filter into the used market naturally.
This isn’t changing for 3-5 years minimum.
There isn’t a single EV that’s been in negative equity in the last few years. Not one.
As for the model 3, it was one quarter of sales. 6,879 cars.
If you order a stock model 3 now, it won’t arrive until between Nov and May. Basic supply and demand, unless there are more than people are wanting, it won’t even out.
Given the supply issues of various components, that’s not changing anytime soon.