PCP a good idea or cash better?
Discussion
Hi all
I'm toying with going full electric and part exchanging my 18 month year old Rav4 hybrid. It looks like I'm going to take a substantial financial hit regarding the value of my Rav4. August 2022 10,000 miles Excel in immaculate condition Motorway and WBAC have offered anything from £25,000 - £28,000. Tesla offered online £24,400!
EDIT: I forgot to add that my other reason for considering the change to EV now is how much my RAV4 appears to be depreciating each month.
I was going to go for a new model 3 with options I want and pay cash on top of the part ex price. But coming from a RAV4 the boot is a lot smaller!
I have never, considered PCP until now.
This has got me playing around with numbers and doing man math's. A Model Y which would be out of my cash budget works out on PCP at £27,374 over 48 months at 1.8% with the options I want. Obviously I need to hand it back after 4 years. But it would hardly dent my savings and I would only need to add around £3,000 on top of part ex offer and over the 4 years I could keep saving and increase my car pot for when its due to go back at the end of PCP deal.
Other than not owning the car albeit with an option to buy at the end (I doubt I would do that) am I missing anything else with my man maths?Pitfalls?
I'm toying with going full electric and part exchanging my 18 month year old Rav4 hybrid. It looks like I'm going to take a substantial financial hit regarding the value of my Rav4. August 2022 10,000 miles Excel in immaculate condition Motorway and WBAC have offered anything from £25,000 - £28,000. Tesla offered online £24,400!
EDIT: I forgot to add that my other reason for considering the change to EV now is how much my RAV4 appears to be depreciating each month.
I was going to go for a new model 3 with options I want and pay cash on top of the part ex price. But coming from a RAV4 the boot is a lot smaller!
I have never, considered PCP until now.
This has got me playing around with numbers and doing man math's. A Model Y which would be out of my cash budget works out on PCP at £27,374 over 48 months at 1.8% with the options I want. Obviously I need to hand it back after 4 years. But it would hardly dent my savings and I would only need to add around £3,000 on top of part ex offer and over the 4 years I could keep saving and increase my car pot for when its due to go back at the end of PCP deal.
Other than not owning the car albeit with an option to buy at the end (I doubt I would do that) am I missing anything else with my man maths?Pitfalls?
PCP is just another way to finance a car - with one exception.
Add up the deposit, the monthly payments and the balloon - that's the total cost of the car.
Subtract the sticker price of the car from the total cost above - that's the cost of using this method of finance. There may be discounts / deposit contributions available which will complicate the comparison.
The only difference with PCP is - if you think that the 2nd hand price of this car is going to drop like a stone, and you're not planning on keeping the car, then the GFV puts a limit on the amount of depreciation you could potentially suffer.
Other complications, such as the cost to you of using cash to buy a car, are things you're going to have to work out for yourself as they depend on your approach to investing your cash.
Add up the deposit, the monthly payments and the balloon - that's the total cost of the car.
Subtract the sticker price of the car from the total cost above - that's the cost of using this method of finance. There may be discounts / deposit contributions available which will complicate the comparison.
The only difference with PCP is - if you think that the 2nd hand price of this car is going to drop like a stone, and you're not planning on keeping the car, then the GFV puts a limit on the amount of depreciation you could potentially suffer.
Other complications, such as the cost to you of using cash to buy a car, are things you're going to have to work out for yourself as they depend on your approach to investing your cash.
Anastie said:
Thanks for the replies.
I was not aware how fast EV's are depreciating. If it is as bad as you say and my RAV4 depreciates slower I might wait a few months
With PCP are you able to return the car midway through the term with no penalty?
No you cant but you could sell it or trade it in but the finance will be upside down mid way and you will have to pay a chunk to get out of it.I was not aware how fast EV's are depreciating. If it is as bad as you say and my RAV4 depreciates slower I might wait a few months
With PCP are you able to return the car midway through the term with no penalty?
If you look at the depreciation curve of most mainstream cars, year 1 is almost a vertical drop, year 2 slightly less and so on.
Checking out now will mean locking in that year 1-2 drop and will repeat that hit on the next vehicle, PCP or otherwise.
If I were you, I'd keep the Rav 4 for 10 years, after all, if you keep up the Toyota services you have a manufacturer backed warranty for the full 10 years.
Checking out now will mean locking in that year 1-2 drop and will repeat that hit on the next vehicle, PCP or otherwise.
If I were you, I'd keep the Rav 4 for 10 years, after all, if you keep up the Toyota services you have a manufacturer backed warranty for the full 10 years.
If your Toyota only has 10k miles on it after 18 months then you're a low mileage user. In which case it might be worth looking at leasing?
Not saying this is a great deal but it's the first one that came up on a Tesla Model Y.
https://www.selectcarleasing.co.uk/car-leasing/tes...
Works out just under £12k for 2 years. I think they are about £46k new so you'd need to look at the total costs involved in the pcp deals you find. One other benefit of leasing is you could sell your Rav4 for say £28k which over 2 years would make £3k in interest at just over 5% which is readily available. That brings the cosy for the car down to £9k when you offset that interest.
I've wondered the same myself. I could pay cash for a car but it feels scary to take such a large amount from savings when the market seems so unstable right now. I think if I really wanted a brand new car I'd lease one. But I'll probably just keep mine or pay cash for a used car.
Not saying this is a great deal but it's the first one that came up on a Tesla Model Y.
https://www.selectcarleasing.co.uk/car-leasing/tes...
Works out just under £12k for 2 years. I think they are about £46k new so you'd need to look at the total costs involved in the pcp deals you find. One other benefit of leasing is you could sell your Rav4 for say £28k which over 2 years would make £3k in interest at just over 5% which is readily available. That brings the cosy for the car down to £9k when you offset that interest.
I've wondered the same myself. I could pay cash for a car but it feels scary to take such a large amount from savings when the market seems so unstable right now. I think if I really wanted a brand new car I'd lease one. But I'll probably just keep mine or pay cash for a used car.
I think you’d be better holding on to the RAV4.
The vast majority of EVs on the road are work leases because they are financially attractive and often the only type of vehicle work schemes allow.
Unfortunately EV seems to be struggling at the moment and if using your own money and worried about depreciation you are taking quite the gamble. I’m a fan of EVs but your in gambling territory with them at the moment.
The vast majority of EVs on the road are work leases because they are financially attractive and often the only type of vehicle work schemes allow.
Unfortunately EV seems to be struggling at the moment and if using your own money and worried about depreciation you are taking quite the gamble. I’m a fan of EVs but your in gambling territory with them at the moment.
Another vote for 'Keep The Rav4' here. There is no way on god's green earth that it is going to depreciate by a further £27k in 4 years - that would make it virtually worthless whereas a quick look on Autotrader shows that 2018 models (so 4 years older than yours), are retailing for circa £18k. it's not like you're going to save a whole lot on petrol with the mileage you're doing either. Of course, if the unspoken motivation for getting the Tesla is that you just want a Tesla then that could throw the above calculations out of the window, but you're going to be rinsed for the privilege. It reminds me of people who say 'ooh the stock market's done well recently so I'll invest a bit now', and then 'oh no, the stock market's done badly recently, so I'll take my money out now'.
Many valid points and helpful advice. I probably needed a shake from the forum to slow my thinking down a little.
Prior to retiring I changed my car every 12-24 months and accepted the financial pain for new shiny things. I do have a car fund put aside but probably should think a little more sensibly about next purchase.
I'd never considered leasing and that's something for me to think about.
Other than financial it would be useful to keep the Rav4 for a little longer this year due to a few trips requiring lots of luggage space planned. That would remove the worry that a M3 may not have enough boot capacity.
Cheers PH'ds
Prior to retiring I changed my car every 12-24 months and accepted the financial pain for new shiny things. I do have a car fund put aside but probably should think a little more sensibly about next purchase.
I'd never considered leasing and that's something for me to think about.
Other than financial it would be useful to keep the Rav4 for a little longer this year due to a few trips requiring lots of luggage space planned. That would remove the worry that a M3 may not have enough boot capacity.
Cheers PH'ds
Anastie said:
Other than financial it would be useful to keep the Rav4 for a little longer this year due to a few trips requiring lots of luggage space planned. That would remove the worry that a M3 may not have enough boot capacity.
Cheers PH'ds
If they are longish trips the Rav4 wins again in terms of rangeCheers PH'ds
Anastie said:
With PCP are you able to return the car midway through the term with no penalty?
Just to expand on that point slightly, the true answer is 'sort of'. You are able to hand the car back early (it's called Voluntary Termination) once you have paid at least 50% of the total finance cost. Due to the balloon payments and interest etc this is usually slightly past the half-way point in terms of timing (typically about 2/3rds to 3/4 of the way through the PCP agreement) but it can be done all above board and legally (it's a right under the consumer credit act or something like that) and - assuming you have met the criteria there are no penalties to pay as long as the car is in good condition and hasn't gone over the agreed mileage.I have done it several times (either when circumstances have changed or I just got a bit bored 3 years into a 4 year agreement) so it's perfectly possible, but obviously you lose any potential equity that might have been building up in the car. In my case, there never really was any anyway, and in a EV 'd be pretty sure there wouldn't be any either, but the main advantage of PCP in an uncertain market is you know you can hand your car back at the end (or slightly earlier as above) and will never be stuck in negative equity.
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