Thinking about my next Rangie and normally, I just buy them outright. However, am I missing a trick?

Should I be leasing it (it would be private rather than through a company)?
Financing it (rates don't seem competitive - I was quoted almost 8% on something recently)?
PCP (whatever that is)?
Land Rover had some some form of 50% down payments and guaranteed repurchase. Any good?

Just wondering if anyone understands these options and can explain them simply, please?

I suppose I'm looking for something where I stick in what I get from my current car, pay monthly, pay an end payment to get the car or walk away if it is worth less. Oh and I don't get raped.

Largely it comes down to personal pref. I used to do PCP on all my cars (Personal Car Purchase - small or no deposit fixed buyback at fixed rate of miles per year etc and monthly payments, basically you are renting the price of the car minus the buyback value, at the end of the period you pay a balloon payment and own the car, hand it back and walk away or use the buyback against a new car). It works well and rates (were) are not too bad.

I decided I wanted to pay less for my motoring (especially with petrol V so decided to stop getting brand new and buy used but more for my money without the depreciation. "On first name terms with my local Dealer......now."

'61 Plate 5.0SC Autobiography - in Black ——— Gone
'53 plate 4.4V8 Vogue Bonatti Grey inside and out. ----- Gone

Price: £78,909.16

If you are interested in this NEW 2011 Model Year Range Rover 4.4 TDV8 Vogue:

Contract hire is available on this vehicle and this can be arranged Land Rover Contract Hire

Term: 36 x months

Mileage: 12,000 miles per annum

Initial payment: £4,444.71 + VAT @ 20%

35 x months £1,481.57 + VAT @ 20%

This is subject to status and underwriter approval

This is based on Business use as VAT is shown separately

You then hand the car back and get the latest model.....

Simples

So for non-business use (ie I pay the VAT)
That is total payments of £67559.59 for the use of a £78,909.16 car but I have nothing at the end of it.

So if I assume a 6% opportunity cost on my money and pay cash I would pay £78,909.16, miss out on £14,203.65 of potential value and have something worth, let's say £30k in three years. So I have lost 48,909 plus £14,203 - so a total of £63,113.

Is that the right way of looking at it?

The deal above only works if its in a company name and the VAT element is reclaimable. About £56k for three years in a brand new Range Rover. Its a good deal for some but not most who should look at Private Contract Purchase, Hire Purchase or simplest of all a re-mortgage (lowest rates) or low interest personal loan.

Right. So leasing seems to be for business users.

How does PCP work? Same way?

Anyone remember the Land Rover scheme?

Hire purchase
Best for
People who want a simple form of car finance that's easy to arrange.

Typical cost
Between 7% and 13% APR.

How it works
You pay an initial deposit, normally at least 10 % of the car's price. Then you pay the remainder, with interest, in monthly instalments. There's usually an administration fee to pay with the first payment and an 'option to purchase' fee with the final one.

Drawbacks
You don't own the car until the end of the contract – so you can't sell or modify the car without the lender's permission.

If you have a good credit record, you'll find that Best Rate personal loans (or re- mortgages) are usually cheaper.

0% finance
Best for
People who can pay a large deposit.

Cost
None.

How it works
You pay a hefty deposit – 35 to 40% of the car's price isn't unusual – and then there's no interest on your monthly instalments.

Drawbacks
It's expensive on a monthly basis and this kind of car finance isn't available on all cars. You're also unlikely to get a discount on a 0% deal, so it could work out more expensive overall.

Leasing
Best for
People who want a new car regularly without the hassle of owning it themselves.

Cost
Monthly payments are normally between £100 and £400 a month.

How it works
You choose your vehicle and how long you want it for, and state your annual mileage. These three factors determine your monthly payments. With some schemes, you can opt for the payments to include maintenance.

Drawbacks
You normally pay a few months' rental in advance. And you have to take out comprehensive insurance to cover damage – which is costly for expensive cars.

See our review of buying vs leasing to find out more.

Personal contract plan
Best for
People who want to keep repayments low and like a new car every two to four years.

Typical cost
Between 7% and 14% APR.

How it works
You put down a deposit, pay monthly instalments as you go along, and leave a lump sum to pay off at the end of the contract.

The amount you defer, which is set by the finance company, is called the minimum guaranteed future value. The lender guarantees that your car will be worth that amount at the end of the contract.

At the end of the contract, you have three options:

pay the deferred sum and keep the car
sell the car privately to fund the final payment
hand the car back to the dealer.
If the car is worth more than predicted, you can use the difference as a deposit on a new car.

Drawbacks
PCPs usually work out more expensive than hire purchase. And there are a couple of complications. First, you have to estimate your mileage – and you'll be charged (say, 9p a mile) for each mile above the estimate. Second, if you return the car, it has to be in good nick – any damage will be charged to you.

I think thats covers them all Gary

For me a lease purchase works best, low deposit & monthly payments followed by a huge big fat balloon at the end I guess this gets me a better car "per month" than I could normally expect

This may not suit everyone, especially some FFRR owners who may just have a few quid under the mattress but as you say its a personal thing and each to their own

Andy. 2015 L405 SDV8 Autobiography, Indus Silver with Black Pack.
SWMBO: 22MY Defender 110 HSE X Dynamic, Gondwana Stone.
Gone: 2014 Discovery 4 HSE Luxury Firenze Red
Gone: 2006MY Java Black TD6 Autobiography
Gone: 2013 Jaguar XKR Convertible, Italian Racing Red with Ivory Seats
Gone: 2010MY Stornoway Grey TDV8 Vogue SE with RSE
Gone: 2008 Disco 3 HSE, Hybrid Tv + Retro-fit RSE System & DVD
Gone: 2003 Epsom Green 4.4i Vogue, LPG, Mk4 Nav, BMW Bluetooth Phone, Hybrid Tv Tuner,

Thanks for laying that all out Gary.

Personal choices I guess.

On a bit of HP I was paying 8% in total on top of what I borrowed, over three years.
Which seemed an unbelieably low APR... so I took it. That was with Lombard.

I've always avoided balloons because I had a mental hang up paying interest on the balloon for the whole term of the agreement.

Mentioned a couple of times was re-mortgage. My advice on this would be don't do it. It may seem cheap re APR but remember that it's interest over a 15, 20 or 25 year period so actually really expensive over the lifetime. And also would imagine you don't have the car for that length of time so paying for something long gone.

My sister in law was about to do exactly that and just mentioned in passing about getting new car and re-mortgaging to fund it. I told her as above and so she checked it out and got a personal loan. Was very grateful as nearly got herself tied into paying for a car over 20 years.

I always avoid balloons - one way or another youve got to pay for it, balloon just means you pay more interest for the advantage of lower payments...it lets people "afford" more car than they could if they had to meet straight repayment loan payments...

So its just preference, and how good you are with investment

IF you are confident you can invest the capital and make a bigger return than the interest you are paying then go for it ...otherwise keep it simple, pay cash, and dont line the pockets of finance companies

Personally, I buy 3-5 year old cars and pay cash....ive spent far too much on loans and depreciation in my early years ...jeez, I could have retired by now on car depreciation figure alone LOL

..naturally if you are a business user, and its an expense, the all the ex-vat low rate leasing options are very appealing...you dont want all your capital tied up a car fleet.... cheers
bogie

scene247 wrote:

Mentioned a couple of times was re-mortgage. My advice on this would be don't do it. It may seem cheap re APR but remember that it's interest over a 15, 20 or 25 year period so actually really expensive over the lifetime. And also would imagine you don't have the car for that length of time so paying for something long gone.

My sister in law was about to do exactly that and just mentioned in passing about getting new car and re-mortgaging to fund it. I told her as above and so she checked it out and got a personal loan. Was very grateful as nearly got herself tied into paying for a car over 20 years.

Dubbs, totally agree. This is only availalbe if you have a mortgage that allows the level of overpayment required - effectively like an overdraft facility. And many other factors in the agreement you have, like early payment penalties etc.

Was just highlighting a situation where people (sis in law) believe the low interest rate means cheap borrowing, but also need to consider term of loan, fees, etc, etc.

Yes I was referring to mortgages as the rates can be very low and IF you are lucky enough to have a FLEXIBLE (no fixed term or payments) mortgage and have paid down the balance by at least as much as you need then its a very simple exercise:

1. Drawing say £40000 from Flexi Mortgage Account to Current Account
2. Buy Car
3. Decide how quickly you wish to repay capital (say four years)
4. Divide 40000 by 48 = £833.33
5. Calculate estimated interest on 40k at say 3% = £100 a month
6. Pay additional £933.33 to your mortgage for 48 months
7. At the end of term you will have repaid more mortgage than £40000 (due to flat interest calc)
8. Car finance has only cost you 3%


As long as you are in control of your finances and stick to the plan its a very sensible option for some.

Gary