Lease to PCP to HP for dream car?
Discussion
Ok, so, my dream car has always been a Porsche. A 997 911 GTS. I’m in my mid 40s now and although I have a good job and decent income, there’s always something in the way of my dream: house buying, refurbishment, school fees, holidays. And that thought that “there will be a better time for it”, which never comes. I don’t want to by in my 60s by the time I get this car or, even worse, die with the regret (very dramatic, I know).
So I am seriously considering pulling the trigger and buying something. But, I don’t want to (or can’t) put the cash right now. I’ve been talking to a broker at Oracle and playing with the idea of putting something minimal down and getting the rest on a lease for 5 years. The cost of credit is ridiculously high, of course. I don’t intend to ever sell such a car while I live. So the intention is to refinance as soon as either the rates come down or I have more cash to put down, which could be as soon as next year. Perhaps initially to a PCP and then an HP or personal loan, until I can own the car outright.
Is this madness? Need to bounce this idea off someone, so please be honest and tell me what you think.
So I am seriously considering pulling the trigger and buying something. But, I don’t want to (or can’t) put the cash right now. I’ve been talking to a broker at Oracle and playing with the idea of putting something minimal down and getting the rest on a lease for 5 years. The cost of credit is ridiculously high, of course. I don’t intend to ever sell such a car while I live. So the intention is to refinance as soon as either the rates come down or I have more cash to put down, which could be as soon as next year. Perhaps initially to a PCP and then an HP or personal loan, until I can own the car outright.
Is this madness? Need to bounce this idea off someone, so please be honest and tell me what you think.
In my head I think there is no need to over complicate it and I’d figure out what you are happy paying a month for it and that be that.
I’d probably go PCP in this case as if you love it enough you can just then purchase or if run out of love just hand back. Also easier to get out of a PCP vs lease with the economic downturn likely around the corner.
Hopefully someone with more experience in this end of the market can advise more.
I’d probably go PCP in this case as if you love it enough you can just then purchase or if run out of love just hand back. Also easier to get out of a PCP vs lease with the economic downturn likely around the corner.
Hopefully someone with more experience in this end of the market can advise more.
If your comfortable with the payments there is no need to overthink it really, its your money and life at the end of the day so enjoy it.
Its all about the interest rates really.
We made a decision in 2021 to PCP a new car as the interest rates were not terrible and we fancied owning a brand new car probably just once in our lifetime.
We will end up buying it and paying the balloon next year in all reality.
Its all about the interest rates really.
We made a decision in 2021 to PCP a new car as the interest rates were not terrible and we fancied owning a brand new car probably just once in our lifetime.
We will end up buying it and paying the balloon next year in all reality.
I bought an Alpine A110S new last year. Could have paid outright for it (just) but decided to PCP it with intention of making the final payment at end of term (4 years)
Works for me as monthly payment is not an issue and have the safety net of being able to hand it back if I have fallen out of love with it or if the market has gone completely belly up - an often overlooked positive of PCP
Works for me as monthly payment is not an issue and have the safety net of being able to hand it back if I have fallen out of love with it or if the market has gone completely belly up - an often overlooked positive of PCP
There's no madness whatsoever. If you're going in with your eyes wide open then you'll know what it's costing you and if you're happy with that then not much else matters.
However, personally I'm very wary of leases. You would need to be 100% certain that you can get out of the arrangement when you have the finances for a more affordable scheme, and that would be my concern with a lease.
Capital Car Finance are also probably worth a look. The other thing I would say is that the initial finance, when you are buying the car from a dealer that is known to the finance companies, will be a lot easier to navigate. Even if you don't have that much of a deposit.
I've only leased one car in my life and I have 100% regret that that was the road I went down. It was the wrong thing to do.
I've taken a couple of PCPs - one of which I let run the full course and then paid the balloon. The other one I paid the balance after about 18 months (including the balloon). In both cases I've still got the car.
However, personally I'm very wary of leases. You would need to be 100% certain that you can get out of the arrangement when you have the finances for a more affordable scheme, and that would be my concern with a lease.
Capital Car Finance are also probably worth a look. The other thing I would say is that the initial finance, when you are buying the car from a dealer that is known to the finance companies, will be a lot easier to navigate. Even if you don't have that much of a deposit.
I've only leased one car in my life and I have 100% regret that that was the road I went down. It was the wrong thing to do.
I've taken a couple of PCPs - one of which I let run the full course and then paid the balloon. The other one I paid the balance after about 18 months (including the balloon). In both cases I've still got the car.
Just to preface I assume by 'lease' you mean 'lease purchase' as you mentioned capital car finance. This is completely different to contract hire lease which is what most people will associate with when you use the term lease.
I would be wary of lease purchase as there is no option to walk away and hand the car back at the end, you are committing to the monthly payment and the final balloon no matter what happens. If you need to get out you will be relying on the car retaining its value to clear the finance and would have to part exchange or sell it yourself which is why lease purchase is way less popular than PCP. Also check the terms of the contract for early settlement. E.g. if you opt to end early in 12 months to refinance on a lower rate, ensure that the contract only requires the remaining equity to be paid at the time of settlement, not the sum of your remaining payments + balloon which will give you a hefty interest cost and financially wouldn't make sense to get out of.
In terms of PCP, it is worth noting interest rates are pretty high on used car PCP currently and that interest is applied to the balloon figure which significantly increases the total interest paid. This is fine for a car you want to hand back at the end if it gets you lower monthly costs, but for a car you intend to keep you will be paying a ton of interest overall versus other finance methods. The benefit here is you will have lower monthlies vs a bank loan or hire purchase and you can then refinance the balloon payment at the end if you don't have the cash to hand. This makes it more 'affordable' on a month to month basis but as total outlay for when you finally own the car outright this will be the highest and take the longest. The other benefit is if the used car market dies and you car is worth significantly less than the balloon payment you can just hand it back which you can't do with lease purchase (although Porsche usually do well for value retention).
In your scenario the best option in terms of total outlay (if cash isn't an option) is a bank loan if you can get one on a decent rate that covers the amount of money you need (for example the rate is around 6.1% up to £25,000 with Tesco last I checked).
I would be wary of lease purchase as there is no option to walk away and hand the car back at the end, you are committing to the monthly payment and the final balloon no matter what happens. If you need to get out you will be relying on the car retaining its value to clear the finance and would have to part exchange or sell it yourself which is why lease purchase is way less popular than PCP. Also check the terms of the contract for early settlement. E.g. if you opt to end early in 12 months to refinance on a lower rate, ensure that the contract only requires the remaining equity to be paid at the time of settlement, not the sum of your remaining payments + balloon which will give you a hefty interest cost and financially wouldn't make sense to get out of.
In terms of PCP, it is worth noting interest rates are pretty high on used car PCP currently and that interest is applied to the balloon figure which significantly increases the total interest paid. This is fine for a car you want to hand back at the end if it gets you lower monthly costs, but for a car you intend to keep you will be paying a ton of interest overall versus other finance methods. The benefit here is you will have lower monthlies vs a bank loan or hire purchase and you can then refinance the balloon payment at the end if you don't have the cash to hand. This makes it more 'affordable' on a month to month basis but as total outlay for when you finally own the car outright this will be the highest and take the longest. The other benefit is if the used car market dies and you car is worth significantly less than the balloon payment you can just hand it back which you can't do with lease purchase (although Porsche usually do well for value retention).
In your scenario the best option in terms of total outlay (if cash isn't an option) is a bank loan if you can get one on a decent rate that covers the amount of money you need (for example the rate is around 6.1% up to £25,000 with Tesco last I checked).
MullacAbz said:
Just to preface I assume by 'lease' you mean 'lease purchase' as you mentioned capital car finance. This is completely different to contract hire lease which is what most people will associate with when you use the term lease.
Yes, that's a very good point. I mentioned Oracle (omniflow mentioned Capital), but yes, I am talking about Lease Purchase in this case. I'll check in terms of what the early repayment entails because that's definitely the plan. Your reasoning around LP and PCP (in particular) is exactly the one I have been playing in my head (and spreadsheets) all this time, and what puts me off (I had never considered LP until the broker suggested it). Rates are so high, that even if affordable monthly, the total charge for the credit looks ridiculous. Between that and depreciation, unless we are talking about something seriously underpriced and holding up it's value very well, it's such a bad deal based on the numbers alone. Which is why it's a head vs heart thing at this point.
It isn't madness to think it through.
I'm in a similar boat but half the financial stakes.. Can buy outright but would rather not see a chunk of change vanish (with a lump in reserves).
With PCP whilst the lower monthly visitor is the main attraction, APR%'s are sky high right now with the best rates still around 9% which ultimately is lumped onto the ' final balloon payment'
It is possible to refinance once some nicer APR's are available however PCP can come with early Termination fees + a months payment as an example.
Whilst you'll need to multiply the below fivefold, see a numbers extract from Halifax below: (i'm too new a user to upload a screengrab image apparently).
Halifax have a PCP vs HP example
Essentially with the PCP interest at 7.61% (good luck finding that low) and HP at 6%:
On the basis of 13K over 48 months:
PCP monthly is £196, HP is £305
PCP balloon is £6,850, HP once you have made the final payment that's your lot.
PCP Total amount payable £16,069, HP £14,674
Not even 2% makes a big difference to the total amount you pay and you're talking multiples of the above, could be a 7K difference at the end.
If you can afford it, don't let hindsight tease you but which is the right path
Just like MullacAbz, it's a head vs heart decision in the current climate.
I'm in a similar boat but half the financial stakes.. Can buy outright but would rather not see a chunk of change vanish (with a lump in reserves).
With PCP whilst the lower monthly visitor is the main attraction, APR%'s are sky high right now with the best rates still around 9% which ultimately is lumped onto the ' final balloon payment'
It is possible to refinance once some nicer APR's are available however PCP can come with early Termination fees + a months payment as an example.
Whilst you'll need to multiply the below fivefold, see a numbers extract from Halifax below: (i'm too new a user to upload a screengrab image apparently).
Halifax have a PCP vs HP example
Essentially with the PCP interest at 7.61% (good luck finding that low) and HP at 6%:
On the basis of 13K over 48 months:
PCP monthly is £196, HP is £305
PCP balloon is £6,850, HP once you have made the final payment that's your lot.
PCP Total amount payable £16,069, HP £14,674
Not even 2% makes a big difference to the total amount you pay and you're talking multiples of the above, could be a 7K difference at the end.
If you can afford it, don't let hindsight tease you but which is the right path
Just like MullacAbz, it's a head vs heart decision in the current climate.
I was in a similar quandary recently but at a lower level, looking to upgrade a £10,000 Boxster to a £30,000 to £40,000 Boxster or Cayman.
I also spoke to Oracle as they advertise with PCGB which I'm a member of and they also pushed me towards lease purchase.
One reason for that seemed to be that you can't get PCP on cars more than about 5 years old, maybe future values are too hard to predict for companies to offer a guaranteed future value and the opportunity to just hand the car back. As has been mentioned with lease purchase you are committed to paying the full amount off in time. The only benefit seemed to be lower monthlies for the next 3 or 4 years but you would need to be confident of having the funds to pay off the residual at the end or the car being worth enough to cover it if you sold.
Oracle offered a slightly lower APR than dealer finance but I still struggled with the idea of paying nearly £40,000 over 3 or 4 years to own a £30,000 car.
The best option for me would have been to take a personal loan for £20,000 over 4 years, at current rates I would have been paying back £22,500ish and wouldn't have a balloon to worry about. Also it wouldn't be secured on the car which would make life simpler if I had to sell early with no finance attached to the car.
In the end I went for an Alpine A110GT which are currently available on 0% PCP on existing stock, having no charge for credit makes a £60,000 car affordable plus not having to worry about any big bills for the 3 years it's warranteed for makes it less of a risk than a secondhand Porsche!
I also spoke to Oracle as they advertise with PCGB which I'm a member of and they also pushed me towards lease purchase.
One reason for that seemed to be that you can't get PCP on cars more than about 5 years old, maybe future values are too hard to predict for companies to offer a guaranteed future value and the opportunity to just hand the car back. As has been mentioned with lease purchase you are committed to paying the full amount off in time. The only benefit seemed to be lower monthlies for the next 3 or 4 years but you would need to be confident of having the funds to pay off the residual at the end or the car being worth enough to cover it if you sold.
Oracle offered a slightly lower APR than dealer finance but I still struggled with the idea of paying nearly £40,000 over 3 or 4 years to own a £30,000 car.
The best option for me would have been to take a personal loan for £20,000 over 4 years, at current rates I would have been paying back £22,500ish and wouldn't have a balloon to worry about. Also it wouldn't be secured on the car which would make life simpler if I had to sell early with no finance attached to the car.
In the end I went for an Alpine A110GT which are currently available on 0% PCP on existing stock, having no charge for credit makes a £60,000 car affordable plus not having to worry about any big bills for the 3 years it's warranteed for makes it less of a risk than a secondhand Porsche!
Ryan-tspg1 said:
.If you can afford it, don't let hindsight tease you but which is the right path
Just like MullacAbz, it's a head vs heart decision in the current climate.
Thanks Ryan-tspg1 for the advise and the illustration. Definitely leaning towards the lower-possible APR PCP I could findJust like MullacAbz, it's a head vs heart decision in the current climate.
Edited by WickedWizzzard on Saturday 10th February 07:27
Derek182 said:
I was in a similar quandary recently but at a lower level, looking to upgrade a £10,000 Boxster to a £30,000 to £40,000 Boxster or Cayman.
Thanks for sharing, very useful. Hope you enjoying the 110That is definitely a consideration for me too. Bills from Porsche are so expensive. I’m looking at some 991s from 2013 with ~40k miles and the amount of stuff that has already gone wrong on them is hard to believe. The prospect of stretching the budget and on top of everything having to foot some expensive bills is a scary prospect. Although there are some examples out there still with warranty, so that’s another possibility.
RacingPete said:
Amazing, congrats. Which route did you go to purchase it out of interest (though cough twice if significant other is looking :hehe)
Wife was actually very supportive, I’m lucky….or maybe she was just so sick and tired of me talking about this and showing her Autotrader adverts. I went through Oracle and got into a Lease Purchase. I know some advised against. But it’s a very flexible deal allowing prepayments and full early repayment with small interest charges, I think the equiv of 2 months if I remember correctly. So still planning to refinance when possible. Chris Bell at Oracle was brilliant.
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