Leasing question

[Bensb93]

Hi All,

A very sinple question. I am looking at leasing at some point when I trade in my S1, which I am PCP'ing, hopefully soon.
With PCP, you effectively take a loan against the whole car, for exanple roughly £28000 on an S1 is in my name when the car was purchased.
Does the same apply to leasing, or is the loan for example 36 x £300 which is just over £10000. I am wondering this as leasing doesn't allow you to own the car and with a mortgage in mind soon, I'd like to be in as best position as possible.
Many thanks.

 

[The Kendragon]

I believe you may have PCP confused. With PCP, you choose a car and a deposit amount. Audi then decide what the car will be worth in 3 years (depending on your agreement) and you finance the difference. You don't own the car, you're just paying the difference between the purchase price and its guaranteed future value in 3 years (depending on your agreement). This means you get to drive a new car every few years without the burden of selling it, MOTs or lack of warranty. You also get to choose at the end whether you trade it in, buy the car or hand it back and move on to another dealer. I've recently bought an A3 using this method and I think it's great!

 

[Bensb93]

Sorry I should have explained better. I am aware during the PCP agreement you don't own the car, but you have the option to, but with leasing you dont.
I was wondering when doing Personal contract hire (leasing) whether the loan amount effectly is the whole car value or the value of the agreement duration I.e. 36 months worth of £300.
Hope that makes sense!

 

[The Kendragon]

Sorry I should have explained better. I am aware during the PCP agreement you don't own the car, but you have the option to, but with leasing you dont.
I was wondering when doing Personal contract hire (leasing) whether the loan amount effectly is the whole car value or the value of the agreement duration I.e. 36 months worth of £300.
Hope that makes sense!

Ah okay, I see what you mean. Basically it's not the car's whole value just the difference between when you buy it and when Audi want it back. My car when new is worth £22,500 but I'm only paying £14,000 worth of finance over four years as Audi have guaranteed £8,500 when/if I give it back (I may have the numbers wrong but it's something like that). Hope that helps?!

 

[RichardT]

But I'm pretty sure that you are paying interest on the full price of the car (less your deposit of course). It may well be advantageous rates from Audi so they sell cars but who else is going to fund it?

 

[DrEskimo]

Don't need to worry about the value of the car with the lease. You pay an upfront payment (deposit, but like with PCP you don't get it back) and you pay a set amount each month, and then the car is given back at the end of the term. No other options.

Basically get the car for as cheap as you possibly can! Check out leasing websites for good deals.

Leases are good if you get a good deal, but options can make it very costly and ending them early isn't easy.

Getting a decent discount on a well optioned car using PCP can usually be about the same as a lease, and personally I prefer the flexibility of swapping cars early or dealing with the dealership directly to get a new deal.

Can be much cheaper if you get lucky and not fussed on options. Some folk got Golf Rs for like £200 a couple of years back...

 

[Bristle Hound]

An example of a lease deal to compare with your PCP one

Audi S5 Sportback quattro 5dr Tiptronic (new model)

PCH 24 months

Initial payment £3600 incl. VAT
23 months @ £335.99 incl. VAT
10,000 miles / year
13p +VAT / mile excess mileage

Admin fee's £180 incl. VAT

https://www.centralukvehicleleasing...e/77108/audi/a5/s5_quattro_5dr_tiptronic.html

If I was ready to change my S4 I would have one of these in a shotTBH

 

[DrEskimo]

An example of a lease deal to compare with your PCP one

Audi S5 Sportback quattro 5dr Tiptronic (new model)

PCH 24 months

Initial payment £3600 incl. VAT
23 months @ £335.99 incl. VAT
10,000 miles / year
13p +VAT / mile excess mileage

Admin fee's £180 incl. VAT

https://www.centralukvehicleleasing...e/77108/audi/a5/s5_quattro_5dr_tiptronic.html

If I was ready to change my S4 I would have one of these in a shotTBH

My PCP on a B8.5 last November was £6k down and £380pm...so yea its a gooden!

Although mine has a lot of options (BE with tech pack, folding mirrors and Sepang Blue), and I can get £2k in equity so I guess its not far off...Guess thats why its always good to compare, particularly when you want options.

Funnily enough big discounts are already achievable on the B9 S5!

 

[Bensb93]

Hi all,
Thank you very much for your comments.
What I am actually referring to you is the loan amount that is effectively under your name, which shows on your credit checks and what not. With PCP the whole value of the car is effectively a debt to me.
I am wondering for example if I leased (PCH) a £35,000 £300pcm car for 36 months whether the debt in my name would be £10,800 or £35,000 and when the agreement ends, they pay the remaining bit off as per PCP?
Apologies for the long winded explaination. I am looking for a first mortgage and I am concerned a £25000 car debt in my name may freak them out. If a lease debt is only the amount agreed to be paid I.e £10,800, it would look a lot better!!

 

[RM88]

Sorry I should have explained better. I am aware during the PCP agreement you don't own the car, but you have the option to, but with leasing you dont.
I was wondering when doing Personal contract hire (leasing) whether the loan amount effectly is the whole car value or the value of the agreement duration I.e. 36 months worth of £300.
Hope that makes sense!

It's not a loan as such but yes the value of the finance on a lease is the the total amount of payments. So for example if it costs you £5000 to lease a car over a 2 year period that is the finance amount not the full £25k cost of the car. So if you use Experian to check your credit accounts it will only show the £5000.

 

[DrEskimo]

Hi all,
Thank you very much for your comments.
What I am actually referring to you is the loan amount that is effectively under your name, which shows on your credit checks and what not. With PCP the whole value of the car is effectively a debt to me.
I am wondering for example if I leased (PCH) a £35,000 £300pcm car for 36 months whether the debt in my name would be £10,800 or £35,000 and when the agreement ends, they pay the remaining bit off as per PCP?
Apologies for the long winded explaination. I am looking for a first mortgage and I am concerned a £25000 car debt in my name may freak them out. If a lease debt is only the amount agreed to be paid I.e £10,800, it would look a lot better!!

Pretty sure the only thing a mortgage looks at is affordability, so will be your monthly outgoings. When I applied for my first mortgage with a personal loan on a car, they just looked at the monthly cost. When I moved and had the S5 on PCP, again they just looked at the monthly payment.

 

[RM88]

As the Dr says though for mortgages they usually look at monthly outgoings rather than full debt amount well they did recently with myself.

 

[DeanoC]

Pretty sure the only thing a mortgage looks at is affordability, so will be your monthly outgoings. When I applied for my first mortgage with a personal loan on a car, they just looked at the monthly cost. When I moved and had the S5 on PCP, again they just looked at the monthly payment.

Yep that's how i understand it. From a credit score point of view having more debt and not missing payments actually makes it better than having less debt but a mortgage is all about money in and money out not the totals.

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[vacant]

PCH gives very little flexibility if circumstances change (you need shot of the car/mileage goes up/down etc) and some can have some suprising hidden bits at the end of contract, or if you write it off. I'd always suggest PCP is worth paying a little bit more for.

 

[billy.rt]

Hi mate, it's absolutely nothing to do with the total cost of the car. I'm leasing a new S3 which is £255PCM over a 2 year term. So on paper I owe the finance company £255PCM over two years this is after I've paid the initial deposit... I've agreed to pay the finance company the agreed amount for the 2 year term, so in a sense it's not a debt, more like a phone contract, except it has a 2 litre lump in the front haha

 

[Bensb93]

Thank you everyone!! Certainly some food for thought!

 

[Soulboy]

If you lease the car - it's no different to hiring a car when you go on holiday.
It's their car and you pay a set amount over a set period to drive round in it - then give it back to them at the end.
It's their car and you just rent it.

There can be good deals, but no/little flexibility.
I know someone who needed to exit a lease deal for Personal reasons and it was tough luck.
Even though he wanted to upgrade to a bigger/more expensive car he was stuck with the lease.

Regards mortgage...
That's the smarter move with record low mortgage rates. Invest in something that may appreciate!

As others have said, the lender is looking at monthly affordability. So the less committed outgoings you have the better.
If I were you - I would be getting the mortgage sorted first and making sure I had no/low committed car finance payments at the time.
Then once you have got a house - get the car sorted.

 

[pburv]

A little info I found from someone who asked the same question....Hope this helps...
http://forums.moneysavingexpert.com/showthread.php?t=5079981
http://budgeting.thenest.com/vehicle-lease-show-credit-report-25563.html

 

[Bensb93]

A little info I found from someone who asked the same question....Hope this helps...
http://forums.moneysavingexpert.com/showthread.php?t=5079981
http://budgeting.thenest.com/vehicle-lease-show-credit-report-25563.html

Very interesting, his name is Ben too!!
Think I may sort out the mortgage first and then change. The mortgage will be very very low, so I'd be shocked if they refused in anyway, but it is best not to risk.
Thank you all

 

[pburv]

Very interesting, his name is Ben too!!
Think I may sort out the mortgage first and then change. The mortgage will be very very low, so I'd be shocked if they refused in anyway, but it is best not to risk.
Thank you all

That's what I would do ....Having a house is more important than a car..
Good luck..

 

[Wibbly]

Slightly off topic, but if you can afford to buy a car outright with money you have in the bank (and ignoring what else you might do with the money) I presume the end-to-end cost of owning the car is always more with PCP/leasing than outright buying-using-selling the car yourself (albeit with more hassle).

Or are the likes of Audi in effect subsidising the price of the car to such an extent that it may be cheaper to lease/PCP end-to-end? You'd think not, as there is some middle-man trying to make money on leasing/PCP, right?

If not Audi, do the PCP/leasing companies rely just on being able to bulk purchase their cars at such a discount that punters could never get, that that's where they make their money, and the PCP/lease deal in effect costs the punter very little compared to paying outright?

 

[DrEskimo]

Slightly off topic, but if you can afford to buy a car outright with money you have in the bank (and ignoring what else you might do with the money) I presume the end-to-end cost of owning the car is always more with PCP/leasing than outright buying-using-selling the car yourself (albeit with more hassle).

Or are the likes of Audi in effect subsidising the price of the car to such an extent that it may be cheaper to lease/PCP end-to-end? You'd think not, as there is some middle-man trying to make money on leasing/PCP, right?

If not Audi, do the PCP/leasing companies rely just on being able to bulk purchase their cars at such a discount that punters could never get, that that's where they make their money, and the PCP/lease deal in effect costs the punter very little compared to paying outright?

Yes, as you're paying no interest. Although this assumes you can secure the same amount of discount with cash or on a PCP, which with Audi isn't always the case, as a proportion of the contribution is based on taking out finance with them. There are ways around it though (take out PCP and settle it early).

Even a personal bank loan is much preferable to a PCP as the interest is less than half what you would pay on a standard personal loan. Even if you could get a comparable APR (i.e. you can get around 3% on the A/S4 range), you are still paying significantly more interest because the GFV isnt going down. Paying interest on a much higher amount across the entire term.

Generally speaking any new car will lose you shed loads of cash, but the interest you pay on a PCP can be very high, particularly over a 48month term.

 

[Flying Scotsman]

For the OP....a mortgage company is only worried about your ability to pay the monthly payments and value of the property. Your deposit, assets, salary, age and credit rating then countered by what you presently owe will then determine what they will let you borrow. What you owe on your car will come up on their credit check and applied to the ability to pay column.
Therefore a PCP or leased vehicle will be looked as a liability.

 

[Wibbly]

Even a personal bank loan is much preferable to a PCP

Makes you wonder why folk (individuals) go for PCP/leasing at all...

 

[DeanoC]

Makes you wonder why folk (individuals) go for PCP/leasing at all...

Because it is quick and easy. The car companies will push it as they shift all their finance packages, get the abilty to plan ahead as its just loads of nice even monthly money and they sort their approved used fleet out so they can make a profit on the same car at least twice.

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[Tom.H]

If you're wanting to go brand new then you'd need to borrow quite a big amount. You wouldn't get any contribution from Audi as such with it not being financed so if you've specc'd a car to £40k, without putting a large deposit down you'd need to borrow a lot of money which would then mean high monthly payments.

 

[DrEskimo]

Makes you wonder why folk (individuals) go for PCP/leasing at all...

As others have said, some won't get accepted due to poor credit, it will have a much higher monthly payment, and potentially you won't get the full contribution (although I would argue that around £1000 less deposit contribution wont outweigh the thousands saved in interest over the term....). Of course you could get a deal with a PCP, take it out, then apply for a personal loan and pay off the PCP, but not sure I would want to take out two high value loans within days of each other...!

Cash is cheaper, but requires a lot of up front capital that most people dont realistically have.

 

[DeanoC]

The biggest behaviour it changes is getting people to buy new and not used because it so accessible.

They sell more so there are more on the 2nd hand market, more means lower prices so lower GFVs, lower GFV's means the PCP is more - nice little cycle.

The only way you really get a good deal is to do what happened in the old days and buy a used car with your own money and keep it for more than a few years. That's not the world we live in and a PCP is a totally ok way for people to get what they want as quickly and simply as possible without saving or owning.

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[Wibbly]

I can see the benefits from the manufacturer perspective & of course they want to change buyer behaviour in this way.

My point is only I wonder how many folk realise what the cost of PCP really is compared with, say, a bank loan and if they really consider if the extra 'convenience' of PCP is worth the extra. I'm not trying to say PCP is bad, only wondering how many folk really evaluate its value to them compared with other options.

 

[DeanoC]

I can see the benefits from the manufacturer perspective & of course they want to change buyer behaviour in this way.

My point is only I wonder how many folk realise what the cost of PCP really is compared with, say, a bank loan and if they really consider if the extra 'convenience' of PCP is worth the extra. I'm not trying to say PCP is bad, only wondering how many folk really evaluate its value to them compared with other options.

I totally get what you are saying. I would say very few do. The thought process is mainly what car can i get in for the monthly figure i can afford. People tend to work month by month nowerdays. Some may run the numbers of a loan and see it comes out more a month and dismiss it, some more still may realise that doing that is skewed as in one case you own the car and one you don't but how many people sit down and work out the ins and outs of the full cost over the planned ownership period of various financing arrangements....

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[Wibbly]

... but how many people sit down and work out the ins and outs of the full cost over the planned ownership period of various financing arrangements....

Fair point. But then I'll do it for a mobile phone contract (similar depreciation %?, options to buy outright up front or [in effect] HP via a 'contract'...), let alone the kind of money involved in buying a car. But that's just me

 

[DeanoC]

Fair point. But then I'll do it for a mobile phone contract (similar depreciation %?, options buy outright up front or [in effect] HP via a 'contract'...), let alone the kind of money involved in buying a car. But that's just me

I'm the same. I spend half my day at work answering colleagues questions on budgeting or mortgages or stock trading because they all know I'm into it (I'm in marketing so nothing to do with money other than spending ahit loads of it). Some people are wired that way, some people aint. It's why places like this are good.

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[Tom.H]

Fair point. But then I'll do it for a mobile phone contract (similar depreciation %?, options to buy outright up front or [in effect] HP via a 'contract'...), let alone the kind of money involved in buying a car. But that's just me

I must admit, I done it for my phone haha worked out cheaper to take the phone out on a contract than but it and get a package.

 

[Wibbly]

I must admit, I done it for my phone haha worked out cheaper to take the phone out on a contract than but it and get a package.

Good for you.


Mind you remember to go SIM only if you keep the phone after the contract period, or you'll continue to pay for the phone even after you've paid for it! ;-)

 

[DrEskimo]

I worked out that my used A5 was only £1500 cheaper than my S5 over a 2year period.

Likewise, a decent deal on a mobile can mean the contract is cheaper than buying the phone outright and getting a sim only contract...over the same period!

Now the way to save money for both is to keep the thing longer than 2/3yrs, but we are all stuck in this insatiable need to consume every few years, leading to over consumption of materials and goods. More deforestation, more slave labour, more coal being burned...etc etc..

God I'm in a cheery mood today...must be Monday...

 

[Wibbly]

I worked out that my used A5 was only £1500 cheaper than my S5 over a 2year period

So just over £60 a month. Was including all costs like insurance/fuel etc etc?

 

[DrEskimo]

So just over £60 a month. Was including all costs like insurance/fuel etc etc?

Yea everything. I did slightly less miles (8k vs 10k), but basically the same. Guess my insurance would be a bit cheaper, but I haven't paid more than £400 for a good few years now so not a massive impact.

I spent about £1400 on servicing during those 2 years (oil change, major inspection, brake fluid, S-tronic gearbox) and had 4 new tyres, 2 new front brakes and pads, 2 new rear pads and had to pay towards fixing my window regulators. I also had water pump replaced and an entire engine rebuild due to oil consumption, but those were under warranty or FOC (thankfully! Engine rebuild came to £6k!!).

I would say that was quite lucky considering what else can go wrong, but I guess if you had a lower mileage car you wouldn't have to do some of those service items.

On my S5 I have only had to replace 1 tyre due to a puncture, and just had its first oil change service. Those were £140 and £240 respectively.

 

[Wibbly]

Yea everything.

So you ultimately did or did not trade in both cars at the end of two years too?

I do the same kind of thing - TOTAL cost of owning a car. Interesting comparison when you look at the cost/mile or cost of the likely alternative like taking taxis if you do a very low mileage. Of course this ignores convenience and the sheer joy of driving a nicely engineered car ;-)

Measurebators of the world unite!

 

[DrEskimo]

So you ultimately did or did not trade in both cars at the end of two years too?

I do the same kind of thing - TOTAL cost of owning a car. Interesting comparison when you look at the cost/mile or cost of the likely alternative like taking taxis if you do a very low mileage. Of course this ignores convenience and the sheer joy of driving a nicely engineered car ;-)

Measurebators of the world unite!

So I sold my A5 privately before I got my new S5. Was offered £9k in trade against the S5, but sold it for £11.2k.

I've had the S5 for 13months so just extrapolated the cost for the next 11months. I'm assuming a trade in of £2k on my S5 at the end based on what I have been offered now. Doing much less miles than my PCP is set to so my differential between the GFV and trade in will be greater than if I did my set mileage.

So yea, if I traded in my A5 I would have seen the cost being the same...!