Its risk assessment which made me lease ( and for the record this is my first lease car since 2001 ). Some of us have decided the electric market is moving so fast that we want an option in a few years time and also think the GFV on the current cars makes leasing ( at the price we are) attractive. In 2 years let’s revisit this thread and I’ll be open and honest in regards to if I made the right financial choice compared to buying - because until that 2 years is up it’s purely conjecture.
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Buy or lease?
- Thread starter Jordan80
- Start date
Its risk assessment which made me lease ( and for the record this is my first lease car since 2001 ). Some of us have decided the electric market is moving so fast that we want an option in a few years time and also think the GFV on the current cars makes leasing ( at the price we are) attractive. In 2 years let’s revisit this thread and I’ll be open and honest in regards to if I made the right financial choice compared to buying - because until that 2 years is up it’s purely conjecture.
Just this week I ordered a new dishwasher, and they wanted £90 to extend the warranty from 2 to 5 years. Amazing business to be in! I of course declined.
A few key points here.
You can buy a new washing machine for a couple of hundred quid. Its a defined risk. If it goes pop you can have a new one delivered from any number of companies competing for your business. If it lasts then you run it until the bottom falls out of it and Then throw it in a skip. You’re not expecting to ever sell it, so it’s doubtful you spend a couple of hours every other weekend rubbing it down with autoglym to protect it.
When you buy a car your biggest expense is the depreciation. You can buy outright for cash and take the risk that the car will hold x% of its value after a few years, But your effectively betting on futures. It may well be worth 60% of what you paid making it a decent purchase, or it might tank like a SAAB 9-5 or a Rover 75 (both excellent cars) did when their parent companies went to the wall, and suddenly be worth whatever cash you can find down the back of the sofa. It’s a risk, and it’s an unknown until the day you sell the car. I can’t tell the future, but I’ve a good idea that the pcp bubble is about to burst, the confusion around Brexit is hammering the value of my pension pot, and used car values are becoming more and more unknown. For me this means the risk in the used car market a is greater unknown with possible higher levels of volatility in future years then when I bought my last car.
Alternatively you can hedge your risk and pay someone else to guarantee that it will definitely be worth a defined amount at the end of a set period by buying on pcp, or simply rent the car and let a lease company take all the risk for you. To my mind the future security of Tesla is not assured. Tesla has hardly been a money spinner as a car company, and has kept itself afloat on hyperbole and clever marketing more than a solid accounts book. They have consistently operated at a high level of risk in technology and in what they offer. They are not VAG, and can not afford several billion dollars worth of fines if something goes wrong. If the bubble does burst and Tesla goes under a la Fisker, then the values of the cars will respond in kind.
So the choice is; go all in and bet on the future value by buying outright, hedge you bets and buy on pcp, or lease it and leave the lease company holding the baby if they suddenly find they’re holding onto a car worth £15k when they betted on it being worth double that when they set their rental charges.
Or, you can buy used. After all, there’s never any risk in buying a used car, is there?
I have no doubt there are a few Tesla buyers like yourself who wouldn't normally lease, but are worried about the future. But my impression is that most "leasers" are just habitual leasers, and those are the ones I don't get.
I've thought long and hard about the question of whether electric car values will plummet. There has been the Tesla Model S in the UK for several years now, the amazing and unequalled charging infrastructure is improving and growing, the cars themselves improve with each software upgrade, the electric market is only just truly opening up, and none of the competitors are remotely close in terms of range, efficiency or features.
As long as you plan to keep the car for the long-ish term, you should be able to get tremendous value out of a Model 3. I personally plan to keep mine for 8-10 years.
Ironic, isn't it? Something that is a throw away item, a complete loss, is something that we all hate insuring against that loss. While something you can actually sell, no matter how bad it is - a car - is insured via leasing, pcp, insurance, tyre insurance, gap insurance up to the gills.
All of this is forms of betting and risk mitigation.
Here is another thought for you, the battery pack alone is going to keep the base price of a second hand tesla higher than any ICE for ages to come. Consider that you have to pay 7k for a powerwall, when a 6yr old Tesla will have several times the capacity of one power wall.
When Tesla first released PCP for the S in UK the balloon payment was 35k on a 60k car after 3 years.... They are still worth 35k after 5 years.
The balloon payment on a SR+ now is £15,731 after 48 months. But if you go for that deal you'd pay £5k over list price, or go for a new one and keep paying for the depreciation (thank you).
It's a personal choice, keep driving new cars every 3 years, or not. And if you don't want the hassle of selling the car then by all means pay for the service. Got nothing against that. Like flying first class, go for it.
Leasing (aka making it someone else's problem) is also betting on futures -- you're just paying for the privilege of not having the risk. The likelihood is that the finance company is better at "guessing" than you are what the real risk is, so you (the consumer) are the loser. If this wasn't true, none of these companies would be in business. If you don't intend on keeping the car for the long term, then fair enough, leasing/derisking makes sense. But even if Tesla went bust, as long as there was someone keeping the lights on enough for the cars to still at least work, they would be no worse than every other ICE car that never receives a single update from the moment it drives off the lot.
There's always going to be a market for people that want to regularly renew their car. No harm in that. But they're paying dearly for the privilege.
Just in case anyone thought come 2021 the Model 3 will be 'out dated', this is what Mazda is showing off as their future EV concept, timetable for 2021 release.....
You read correctly, 131 miles of 'official' range, for release in 2021, yeaph here comes the tidal wave of EVs ready to make overtake Tesla on tech
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Electric Mazda MX-30 receives RX-8-style doors | Autocar
You read correctly, 131 miles of 'official' range, for release in 2021, yeaph here comes the tidal wave of EVs ready to make overtake Tesla on tech
.Electric Mazda MX-30 receives RX-8-style doors | Autocar
Lexus a bit better, 310 miles of offical range, but maybe wait a bit before putting the deposit down, I think my toddler can sketch a car design that's closer to production than the cartoon fantasy Lexus is currently showing off!
Dramatic Lexus LF-30 concept unveiled | Autocar
Dramatic Lexus LF-30 concept unveiled | Autocar
I've been driving EV's for enough years to realise that the often touted line about leasing EV's being best due to the rapid pace of change is not really that valid.
Having said that, the model 3 is a special case IMO and having monitored the facebook group for a few months and seen the absolutely huge list of issues being reported there is no way I'd be wanting to buy the car outright.
Having said that, the model 3 is a special case IMO and having monitored the facebook group for a few months and seen the absolutely huge list of issues being reported there is no way I'd be wanting to buy the car outright.
I think this sums the whole scenario up - it's personal choice and comes with a price. For me, and seeing all the issues that are beginning to emerge from the older Tesla S's (batterygate, chargegate, MCU failures, heaters going pop, door handles etc etc) there's no way in the world I'd want to run one out of warranty - and that's before I factor in Tesla's financial weakness and inability to run the business properly.
And that's before I think about the competition apparently emerging, not that I've seen anything that competes with my car and the charging network - but that will change. I doubt it'll change quick enough for me , so I'm likely to be chopping my S in for a new one and so it goes on.
I've been thinking about this topic and I still can't work it out from the risk management point of view (I understand the "I want a new car every two years, cost be damned" point of view). From the de-risk standpoint, we're talking about PCP, correct? So, a concrete example:
Tesla Model 3 LRAWD, MSM, Black Interior, Tow Hitch: £49,990
PCP for 4 years (10,000 miles a year) with £4,999 deposit works out to £654.17 per month, and a residual value of £20,022. Add all those things up, and you end up with a total cost of £56,421.16. So managing the risk for those 4 years is costing you £6,431.16. Or in other words, you are betting that a 4 year old fully specced Model 3 with 40,000 miles on the clock is going to be worth SIGNIFICANTLY LESS THAN £13,590.84 (£20,022 - £6,431.16). Have I got that right? This seems pretty unlikely (although not impossible -- Tesla could brick every Model 3 in the world and refuse to un-brick them).
I just don't see how this is of benefit to anyone (again, from the risk management perspective). Maybe one of my built-in assumptions is that someone with enough money to buy a Tesla can afford to lose a few thousand; it just doesn't make sense to pay someone else £6,431.16 on the off chance that you (the buyer) are right and they (the finance company with decades of experience in the market) are wrong.
By my (non-expert) calculations, a car worth £49,990 when new could fetch £15,000 at 8 years old (I'm aiming to get £5,000 for my 12 year old Golf GTI, so it seems reasonable), so at the end of year 4 it would be worth around £24,720. So The PCP residual value estimate is already very conservative. Even if the car fetched only £10,000 at 8 years old, its value at 4 years would still be around £21,000.
Tesla Model 3 LRAWD, MSM, Black Interior, Tow Hitch: £49,990
PCP for 4 years (10,000 miles a year) with £4,999 deposit works out to £654.17 per month, and a residual value of £20,022. Add all those things up, and you end up with a total cost of £56,421.16. So managing the risk for those 4 years is costing you £6,431.16. Or in other words, you are betting that a 4 year old fully specced Model 3 with 40,000 miles on the clock is going to be worth SIGNIFICANTLY LESS THAN £13,590.84 (£20,022 - £6,431.16). Have I got that right? This seems pretty unlikely (although not impossible -- Tesla could brick every Model 3 in the world and refuse to un-brick them).
I just don't see how this is of benefit to anyone (again, from the risk management perspective). Maybe one of my built-in assumptions is that someone with enough money to buy a Tesla can afford to lose a few thousand; it just doesn't make sense to pay someone else £6,431.16 on the off chance that you (the buyer) are right and they (the finance company with decades of experience in the market) are wrong.
By my (non-expert) calculations, a car worth £49,990 when new could fetch £15,000 at 8 years old (I'm aiming to get £5,000 for my 12 year old Golf GTI, so it seems reasonable), so at the end of year 4 it would be worth around £24,720. So The PCP residual value estimate is already very conservative. Even if the car fetched only £10,000 at 8 years old, its value at 4 years would still be around £21,000.
The thread title is buy or lease. So, no, we are not talking about PCP
But if we were then the bet is that is worth MORE than 20k, not less. A PCP GFV ( in this case £20k) is the amount you would pay to buy the car at the end of the agreement. If the car is worth, say £30k then you’ve gained 10k equity in the car so could, theoretically use that as a deposit for the next car. If the car is worth less then 20k then you hand the keys back as you’d have to be a complete fool to buy it.
EDIT : my own lease ‘bet’ is that the market value of a 2 year old M3 performance with 20k on the clock is worth less that the 52-14 ( cost of lease ). So £38k. If it is worth more then it may have been cheaper to buy ( assuming my 52k in the bank would have zero return on any investment I may choose for it) . If the market value is, say , 30k then I buy it off the lease company for that, then add in the 14k lease cost and I get a 52k car for 44k. Only time will tell...
But if we were then the bet is that is worth MORE than 20k, not less. A PCP GFV ( in this case £20k) is the amount you would pay to buy the car at the end of the agreement. If the car is worth, say £30k then you’ve gained 10k equity in the car so could, theoretically use that as a deposit for the next car. If the car is worth less then 20k then you hand the keys back as you’d have to be a complete fool to buy it.
EDIT : my own lease ‘bet’ is that the market value of a 2 year old M3 performance with 20k on the clock is worth less that the 52-14 ( cost of lease ). So £38k. If it is worth more then it may have been cheaper to buy ( assuming my 52k in the bank would have zero return on any investment I may choose for it) . If the market value is, say , 30k then I buy it off the lease company for that, then add in the 14k lease cost and I get a 52k car for 44k. Only time will tell...
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Am actually undecided on this, coming from a history of Lexus ownership this may seem like a horrible list, but any former BMW/Audi/Mercedes owners will tell you that list is actually very small compared to many equivalent priced combustion cars.
The battery issues so far does seem to belimited to a handful of cars, and DC rapid charging has been known to be bad for cells, but even a DC capped S/X charges faster than most brand new EVs been sold today, and the Model 3 pack seems to have a much higher DC charger counter.
Heater failure actually seems quite uncommon on older cars, seems more to be a batch quality issue.
Door handles - seems like a DIY job.
The only major thing is the MCU, which if you believe Elon is going to be fixed.....Depends on if you believe him.
I've got 20k to run on the factory bumper to bumper warranty, I can extend it for another 4 years and 50k for £3k, which is far cheaper than buying a new X, but am still undecided if I should go for it - warrant that is.
When the car is out of its 8 year battery/motor warranty I'll probably think about selling, by than I suspect the car will at 120k+, if Tesla does every sell an battery pack upgrade for the car I'll probably go for it than.
Out of all the cars I've owned our X is the only one I would call a 'keeper', unless something catastrophic happens I cannot see us selling it.
Leasing a X every 2/3 years would cost substantially more by the time we hit 8 years and 120k+, even with extended warranty costs.
There's a lot of 'seems' in there, and we just don't know what might be next - or indeed whether batterygate in particular is the tip of an iceberg.
I haven't looked at but I'd be worried about the small print on anything 3rd party.
I'm afraid I don't. Too many examples of unfulfilled promises or "mis-information" e.g. the HP on the P85D ( I think it was that model) and AP2.5 being just "redundancy".
I completely agree, and that's the price one pays for the peace of mind and shiny new toy
Sorry, having never done any of these before, I'm still learning the difference between them all. With PCP you *have* to buy the car at the end, and with Contract Hire (what the UK calls lease?) you *can't* buy the car, even if you want to? I'd assumed the PCP buying back at the end was optional.
So if you have PCH ("lease"), and you want to buy the car from them, you can't, right? But what if you really loved the car, does that mean you now have to go and buy a 2 year old M3 performance on the open market, and hope you can get it for the £38k, and in the condition you maintained your car, and with all the same specs?
With PCP buying the car is an option and you know what the price is - the Guaranteed Future Value (GFV). With contract hire aka lease you don't have the right to buy the car, but often it is an option at a price agreed at the time.
Arguably PCP is a little more flexible in that you can pay the finance off, e.g. by p/exing or selling the car mid term, whereas with a lease there are usually penalties for terminating early.
IanB
Member
I’m reading this thread with great interest as I’m also considering leasing for the first time, main reason being the investment many companies are putting into EV’s currently which will hit the market in 1 - 3 years, EV has really given the car industry the kick up the arse it needed.
my current ICE car is now just over 9 years old, and although only a Ford Focus it has all the bells and whistles that many ICE cars come with now, heated seats, heated front screen, DAB radio, voice control for phone, Bluetooth, keyless entry, keyless start etc etc, so things not changed much in 9 years, but thing I think will be very different in the next 9 years compared to a car bought now.
so my thinking is that it makes sense to lease for 2 - 3 years, by then the market will be very different, ICE phasing out with lots of exciting cars out there.
and as for leases, have you seen the great deals on the I Pace? Although I prefer the Tesla 3
my current ICE car is now just over 9 years old, and although only a Ford Focus it has all the bells and whistles that many ICE cars come with now, heated seats, heated front screen, DAB radio, voice control for phone, Bluetooth, keyless entry, keyless start etc etc, so things not changed much in 9 years, but thing I think will be very different in the next 9 years compared to a car bought now.
so my thinking is that it makes sense to lease for 2 - 3 years, by then the market will be very different, ICE phasing out with lots of exciting cars out there.
and as for leases, have you seen the great deals on the I Pace? Although I prefer the Tesla 3
for those on here who have not understood a PCP between a PCH this is not selective to Tesla but also applies to ICE , I would suggest going here to gather a broader understanding
Best Lease Car Deals Available? (Vol 7) - Page 440 - Car Buying - PistonHeads
Best Lease Car Deals Available? (Vol 7) - Page 440 - Car Buying - PistonHeads
You are splitting hairs...
But just looking online for a random m3p lease deal. Can only find 4 year ones, not 2 year ones.
So a random 48 month example
4722 (or 9 month) initial rent
525/m
Gives you a total of 29922 over 48 months
That makes the bet that the m3p with no optional extras @ 52,990 today will be worth 23,068 in 4 years. More than 57% depreciation.
So the argument is thus:
1. How much money are you actually saving?
Yes you can invest lets say 47k @ decreasing intervals and make say 1%-2% in an ISA. So that's maybe 2.5k over 4 years if I'm being generous. - you will need the extra 5k for the lease deposit. Also don't forget that the lease company will take that gov grant, thank you very much.
Plus the amount that you think you will save betting against the leasing company, so say model 3 performance sells for 19k after for years, so you saved yourself 4k - if it goes for 19k after 4 years i'll swap my SR+ for it.... Of course it could go the other way and it could sell for more than 23k, say 25k - you just lost that ISA profit.
Then there is the miles.... The above example is 8k miles
2. If not financial, what risk are you actually mitigating? Yes if the car is a complete lemon you can get a replacement, but then there is the warranty over the same time period
3. You don't want the hassle of driving the car for a trade-in or getting a good private sale. Here is the main benefit, the premium lounge of the car world. Drive first class, pay the cash.
And after those 4 years, do you really need a new car again? Yes it might break down a bit more, but it would still be cheaper to run that paying 30k for another lease. So maybe you can keep it another 4 years? Then you are talking EV here, so not really that much to break compared to your average ICE car.
So really it comes down to a lifestyle choice. Would you like to have a new iPhone every year? New car every 2 years? New house every 5 years? etc...
Of course what I don't mention is if you cant get 50k from a bank or otherwise then you probably shouldn't be buying a 50k car in the first place, but then lease is a valid option if you still do.
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