Buy or lease?

[WannabeOwner]

over the course of 2 years would've spent ~£23,500 (fully loaded with FSD) on the lease. If I bought the car outright it would've cost (from memory) £57,690. Would I expect it to be worth significantly more than £34k (~40% depreciation) after 2 years in order to make buying outright more pallatable?

If you finance the car you have the use of the capital sum during ownership (to invest etc) whereas if you buy it you don't, so I would take that into account when comparing if TCO is different.

running a car that's always less than 2-3 years old means that you are constantly funding the heaviest part of its depreciation curve

Before Electric I changed my car around 80,000 miles which, for me, was around 2.5 years because that insulated me from mechanical problems, and as a high mileage driver a car that works 100% of the time is important to me. So I was trading off depreciation cost for "no down time", and in the event I got a Lemon it was the manufacturer's problem.

Dunno about EV ... My car is well over 80,000 miles now and hasn't been serviced for well over a year and more than 30K miles ...

Owners with cars 2 and a bit years old (me) have AP2 and not AP2.5. This means I don’t get dashcam or proper sentry mode.

Mine is older still, AP1 . it has bang uptodate Infotainment, same as everyone else, except [as you say] for the bits that are not available on my hardware. DashCam / SentryMode, some games, and so on. There isn't anything that I, personally, am hankering after. Pretty remarkable really, given my experience with every car I have ever bought in the past which was significantly superseded in 3 years ... and never had an upgrade of any sort, not even for Money! ... not even Satnav maps ...

When I bought my Model-S I paid cash. Pound then fell like a stone which has helped ...

My concern, paying cash, was that the "emerging new EVs" would eclipse the by-then ageing Model-S. Well, I got that one wrong ... iPace, eTron, ECQ were all significantly later-to-market than I expected and didn't match my car for range ... and they all have to grapple with 3rd party charging which remains a complete muddle. They might be desirable for other reasons (coach-building/Luxury/personal-preference) but they are not "better EVs" in any sense.

And around that time Tesla came out with Model-3, with much better efficiency, and retro fitted that to Model-S so new Ravens have significant more range than The Rest. I don't read on this forum of "broke down at roadside" or "it wouldn't start", but I do read of that on the iPace forums (diddly squat production numbers compared to Tesla of course ...)

So I'm pretty confident that if I pay Cash, now, the car I have in 3 years time will be on a par with brand new models being released by others. The only one looking like challenging Tesla on Range and Price is VW. But still not possible to own one, in decent numbers, for another year. The hatchback will be appealing to UK buyers ... but in 3 years time the VW ID's available 2nd hand will be a year younger than Model-3, so premium price I expect, and thus Model-3 2nd hand sale price should be OK.

 

[Durzel]

If you finance the car you have the use of the capital sum during ownership (to invest etc) whereas if you buy it you don't, so I would take that into account when comparing if TCO is different.

Yup, that is a factor that shouldn't be dismissed. I am more likely to do PCH than I am buying outright.

 

[kkillebrew]

It is appreciating assets you buy, not depreciating ones.

What?? We are talking about finance strategy. By your logic then, no one should buy a Tesla? Only pay cash? Or do you believe a Tesla to be an appreciating asset?

If you MUST have the best possible car with the cheapest possible payments then, yes, by all means plop down 10% you will never see again and go for the cheap payments. Buy what you cannot afford, people here will obviously help someone build a house of cards.

 

[GT_M3]

I debated this too... historically I have kept cars for 8+ years so buying outright was probably the better bet... but with an EV there is the 'something better coming along' argument (more so than old-tech ICE cars) which will depreciate current EVs faster.

I'm sure this is true, however I decided that as the car I'm getting is good enough for me now, doing all that I need it to do, it will likely be good enough for me in the future, even if there were no more software updates. Yes I might miss out on some fancy new self driving tech or longer range, but as long as the car can last 10yrs, 100k+ miles and the infrastructure still exists to charge it, I see no reason I have to change it before then (although I may choose to ).

Also examples of a couple of people at work helped sway me to purchase outright...
- one is in a continual PCP cycle where he says getting a loan to clear the final payment costs more monthly then his next monthly PCP option, so he just keeps getting a new PCP. Been doing this for 10+ years, works for him but doesn't appeal to me. That Fiesta must have cost a fortune by now, but at least he has CarPlay.
- a second guy lives in London and says that he has to sell his old car in a couple of years due to emissions changes. If he could buy a 2nd hand electric car with good range he would pounce on it. He wont spend to buy a car with the 'latest and greatest' features so that doesn't matter to him. Think how many used-car buyers there will be for a used reliable EV that saves them money on running costs and allows them in to city centres. As long as the battery holds up and the motors don't explode I think the second hand price will hold up too, even without the latest hardware.

..And one alternative point just to balance it out... had I won the lottery I'd want a super short lease to have the latest and best at all times... because then I could afford to.

 

[kkillebrew]

I agree GT to some extent. When you are wealthy the world is your oyster - you might find a lease is just too much trouble though, and keep your old Tesla..., or your old Jag or whatever... IF you won the lottery ;--)

 

[Durzel]

What?? We are talking about finance strategy. By your logic then, no one should buy a Tesla? Only pay cash? Or do you believe a Tesla to be an appreciating asset?

If you MUST have the best possible car with the cheapest possible payments then, yes, by all means plop down 10% you will never see again and go for the cheap payments. Buy what you cannot afford, people here will obviously help someone build a house of cards.

That's a very simplistic way of looking at it though. Not everyone who leases can't afford the car. From experience of buying outright a 458 I was told by the dealer that 90% of people buying the car were financed. I suspect hardly any of that percentage couldn't "afford" to own the car.

I assumed PCH/PCP would be manifestly more expensive than buying the car outright, to the point where I thought my spreadsheet numbers were somehow broken, but the reality is that the quotes I got before on a 9+23, 15k deal would've resulted in me paying £17,150 total over the lease period. Buying the same car for ~£51,000 and keeping it for 2 years would almost certainly saw me losing the same amount in depreciation, no matter how much Tesla Kool Aid you drink.

Obviously PCH means you never own the car, unlike buying it, but in the examples I was looking at (Leaseplan) I was told they actually do allow customers to buy at the end of the lease.

 

[JCremonini]

Whether you lease or go through PCP , the notion you somehow cannot afford the car is laughable. I made my decision based purely on my desire to change my car after 2 years and weighed up the unknown residuals on a 2 year old model 3 Tesla and my thoughts on how the technology would affect them. You have to make your money work for you as best you can - and my maths told me the way I am doing it is cheaper than buying outright, for MY circumstances.

Whether I am right or not, time will tell.

 

[gangzoom]

my maths told me the way I am doing it is cheaper than buying outright, for MY circumstances.

Yet the OP clearly states they normally keep their cars for a while and is thinking of buying out right.

Your circumstances of changing to a brand new car every 2 years is in no way the 'norm', maybe for you and your peers but most of us can only dream of swapping to brand new cars so often!

 

[JCremonini]

Yet the OP clearly states they normally keep their cars for a while and is thinking of buying out right.

Your circumstances of changing to a brand new car every 2 years is in no way the 'norm', maybe for you and your peers but most of us can only dream of swapping to brand new cars so often!

He also states he is thinking of leasing but did not specify the lease period. Therefore, considering he was asking a question I thought I’d reply

Also, please read what I have written. Nowhere have I said I swap my cars every 2 years. What I have said is that I will lease the Tesla for 2 years and then make a decision after that. My current car is 3 years old btw.

 

[pmg102]

Yet the OP clearly states they normally keep their cars for a while and is thinking of buying out right.

Speaking of the OP - would be nice if he chipped in, after his hit-and-run post!!

 

[zayn]

I think the op and anyone else here who is unsure of leasing needs to head to PH forum , they have some great advice Best Lease Car Deals Available? (Vol 7) - Page 419 - Car Buying - PistonHeads

 

[Jordan80]

Thanks everyone. So much information. Food for thought.

Buying outright still seems to work for us. We want to keep the car, using it for trips to Europe (instead of flying). Not sure leasing works.

 

[rotor2k]

Anyone who thinks any sort of financing is cheaper than outright buying and losing the depreciation is fooling themselves. The finance companies are not in business to lose money, and they are better at this than you are. There may be plenty of reasons to finance, but cheapness is not a valid one. Kind of reminds me of day traders - everyone seems to know a successful one, but we know that in reality that can’t be true.

Edit to add it’s really good to see the discussion and lots of different points of view.

 

[Kenners]

It's not always the case the lease companies get it right as they use historical depreciation rates, so can get stung. I was told by several VW people that the Lease people are often useless at calculating residuals and often got the lease prices plain wrong. Plus there are other variables, like time of year and the need to hit sales targets, so they shift loss making units that are more than covered by bonuses for hitting sales targets and others like cost of finance. So you do need to take a view on certain aspects. But 90% of time its gonna cost you more as more mouths to feet round the trough!

 

[Latibes]

What do Lease companies do with the car after the lease period?

 

[Generator]

What do Lease companies do with the car after the lease period?

They sell it.

 

[Latibes]

What if the resale value of the car plummets?

 

[pgh69]

I have just signed a 2 year lease on a MS and MX (for business use). I was debating whether to do a 3 year lease or 4 year pch (VT after 3 years) but decided that we are now in a era of great unknown.

Every major car dealer worldwide are spending billions of £'s on EV development and there is no doubt that the market place will change (maybe away from Tesla as the market leader) over the coming years.

To me there are just to many variables (residual values as other retailers flood the market with EV's, other new marques that will come out and yes may be more desirable than a Tesla) to take a long view on anything above 2-3 years.

I don't want to be in a situation in 2 years thinking, gosh wish I hadn't bought! Rather be thinking OK there nothing new that takes my fancy so I'll either renew the lease on my existing Tesla (at a lower cost) or lease a new Tesla.

In case you didn't know, leases can be renewed upto 6 months before the end of the existing lease for any period of extension (generally at a reduced price) and to my knowledge there is no limit as to how many times you can renew the lease

 

[BZM3]

I'm seriously considering buying a model 3 AWD long range. We're in the fortunate position that we can just about afford to buy the car without finance. However I've been told I'm mad to consider this. With all the tech updates coming I should only consider leasing. We don't change cars frequently so I can't see any value in a lease. Am I missing something?

I did 36 month lease, can't wait to get the new one in my opinion too much comes with owning a car. but just personal preference...

 

[Yev000]

If anything this thread shows how many people can justify spending more money for some kind of perceived security. This is like convincing yourself to buy that appliance insurance plan because you think the washing machine won't last past the 2 year warranty period.

I just like to thank all those lease buyers for a wonderful UK second hand car market. Without you cars would be so much more expensive. Thank you for paying that depreciation every 2-3 years so that the rest of us can afford cars.