Lease v buy 2020

[White Eusebio]

I realise the issue has been addressed before, but i also think the relative pluses and minuses of leasing v renting keep changing with a variety of circumstances, so I'd welcome the Wisdom of the Crowds on this forum
I'm about to order a Model 3 performance, and would ideally like blue (possibly silver) with white interior, which I realise will slow things down a bit
To me the main argument for leasing is that there may be a generally better Model 3 in 2/3 years and leasing offers a pretty risk-free way of being able to change cars if/when there is.
Crunching the numbers, a 2 year lease looks way more expensive, and that already takes some of the shine off the "take advantage of a new model" argument
Looking at 3 year leases, it seems that if I bought rather than leased I'd pay c£27k more to buy, but I'd own a 3 year old car at the end of it. This represents 46% of the purchase price.
Research online suggests a 50% depreciation over 3 years, although if there is a super duper new Model 3 that might reduce resale value of the old ones
So realistically, they're near enough the same in financial terms
If there isn't a super new Model 3, or if the super newness can be retro-installed, the I'd probably keep the car for several years more, in which case buying is definitely a better financial option
Does leasing offer significantly better protection against a Friday afternoon special? i'm guessing probably not while in warranty
On a trivial level if I buy I can have fun modding the console, tinting rear windows etc
I'm leaning slightly to buying but would welcome arguments against

 

[NastyNick83]

At the moment, the depreciation of the M3 seems incredibly low. Over 3 years that may be different of course.

How would you find the ~£56k to purchase the car? Interest rates etc. may have a bearing on extra costs to buy

 

[phil4]

The way I see it you've got three choices:

Lease - No flexibility - you have the car for the term, can't give it back early, can't keep it at the end. But also the cheapest way to do it.

PCP - Like a lease - but you can give it back early (VT or sell and settle), and you can keep it at the end if you pay. It's not as cheap as Leasing, but has upsides.

Both of these also limit your risk, as it doesn't matter how much the car is actually worth, due to new models or market changes, you can hand the car back and pay nothing.

HP - More expensive that either, but very flexible as it's essentially your car.

I've always liked the idea of Lease, but never done it, and gone with PCP instead. It meant for example that when Tesla did the £3K discount on M3's this month, I could trade my PCP'd Golf, and get a little equity thanks to low Covid miles towards the Tesla.

I'd not have been able to do that with a Lease... which is why I don't do it. Best would be HP, but as you say, car may improve and it's out of my price range.

 

[Jibjab]

The way I see it you've got three choices:

Lease - No flexibility - you have the car for the term, can't give it back early, can't keep it at the end. But also the cheapest way to do it.

PCP - Like a lease - but you can give it back early (VT or sell and settle), and you can keep it at the end if you pay. It's not as cheap as Leasing, but has upsides.

Both of these also limit your risk, as it doesn't matter how much the car is actually worth, due to new models or market changes, you can hand the car back and pay nothing.

HP - More expensive that either, but very flexible as it's essentially your car.

I've always liked the idea of Lease, but never done it, and gone with PCP instead. It meant for example that when Tesla did the £3K discount on M3's this month, I could trade my PCP'd Golf, and get a little equity thanks to low Covid miles towards the Tesla.

I'd not have been able to do that with a Lease... which is why I don't do it. Best would be HP, but as you say, car may improve and it's out of my price range.

Good summary. I’ve bought outright from savings, PCP, leased and got a bank loan in the past depending what else is going on in my life (releasing capital for houses/businesses etc). I’ve come to the general conclusion that it all equates to broadly the same outcome give or take. Pay more now get more later, or vice versa.

Buy with cash with no interest payments and depreciation is the only loss and leaves you with the most amount of equity, lease for a relatively small up front deposit and probably the lowest monthlies of any finance method but no equity, a bit of a bigger up front payment and higher monthlies for PCP that should give some equity at the end of the period, bank loan /HP will result in high monthlies but also high equity.

Personally I think It depends ultimately how long you plan on keeping the car and how you’d like to manage your finances.

You do have a little bit of flexibility with a lease. You can increase the mileage during the term, but not decrease, which is quite handy at the moment. You can voluntarily cancel the contract but usually it’s circa 50% of the remaining term. Not brilliant, but better than nothing.

 

[DJP31]

Personally I think It depends ultimately how long you plan on keeping the car

I think this is the fundamental starting point. If you want to keep the car long term, and take on the car out of warranty, then buy it using the cheapest route possible. That could be cash or finance e.g. bank loan, HP or even via your mortgage.

If you don't want to own it, lease will probably be cheaper than PCP.

If you're not sure, then make a comparison between the costs of lease and PCP. Once you have the numbers, the decision is then whether the premium for the flexibility of PCP is worth it.

I have always PCP'd as the premium for flexibility has, IMO been worth it. However, for the Model S I've just collecetd I have leased for the first time. Over the 4 years the cost is £10k less than PCP. That's too big a premium for me to be worth it.

 

[tomorrowman]

For me it was a Cash. But that was only because I purchased through my company and the governments 20% tax saving to do it that way and the 0% Benefit in Kind Tax made it a very compelling option

Agreed this comes with pre-requisites i.e. having a Ltd company

 

[-monky-]

I realise the issue has been addressed before, but i also think the relative pluses and minuses of leasing v renting keep changing with a variety of circumstances, so I'd welcome the Wisdom of the Crowds on this forum
I'm about to order a Model 3 performance, and would ideally like blue (possibly silver) with white interior, which I realise will slow things down a bit
To me the main argument for leasing is that there may be a generally better Model 3 in 2/3 years and leasing offers a pretty risk-free way of being able to change cars if/when there is.
Crunching the numbers, a 2 year lease looks way more expensive, and that already takes some of the shine off the "take advantage of a new model" argument
Looking at 3 year leases, it seems that if I bought rather than leased I'd pay c£27k more to buy, but I'd own a 3 year old car at the end of it. This represents 46% of the purchase price.
Research online suggests a 50% depreciation over 3 years, although if there is a super duper new Model 3 that might reduce resale value of the old ones
So realistically, they're near enough the same in financial terms
If there isn't a super new Model 3, or if the super newness can be retro-installed, the I'd probably keep the car for several years more, in which case buying is definitely a better financial option
Does leasing offer significantly better protection against a Friday afternoon special? i'm guessing probably not while in warranty
On a trivial level if I buy I can have fun modding the console, tinting rear windows etc
I'm leaning slightly to buying but would welcome arguments against

I came to pretty much the same conclusions last year. I was ultimately planning to buy and take the same approach - i.e. expect to take the depreciation hit after 3 years but also have the option to keep it for longer and reduce the overall TCO.

Then the company car BIK rates fell, and with all incentives leasing through my work's scheme ended up meaning with a salary sacrifice lease I would be paying about half the expected depreciation over 3 years. Yes I lose the option to extend the term and reduce the overall TCO, but I may still have the option to purchase outright at the end of the lease (if the depreciation is significant, this might be attractive) and I can weigh that up against leasing a new one and doing it all again, or buying a new one (if the depreciation is as low as everyone says, this is a good way to test that).

If you have a company car option (or a salary sacrifice lease) then right now it is incredibly attractive compared with buying. I crunched all the numbers and that was my conclusion.

 

[White Eusebio]

Thanks for those thoughts
I could in theory buy it as a company car for my one-man consultancy, but as my turnover is low and falling as I get nearer to complete retirement my conscience tells me that would be nudging tax evasion
I'm in the lucky position of having cash. which is earning me precious little, so the opportunity cost is low
Unless there's a much better newer one I anticipate keeping it for as long as my current car (now 8 years old). It helps that i do very low mileage

 

[94jdh]

For me it was a Cash. But that was only because I purchased through my company and the governments 20% tax saving to do it that way and the 0% Benefit in Kind Tax made it a very compelling option

Agreed this comes with pre-requisites i.e. having a Ltd company

On top of the now 19% corporation tax relief, the 0% BIK - if it's leased, you can also claim half of the VAT as well.

 

[Gamemeister]

Ye my figures is making lean towards leasing. In 3/4 years time there will be availability of used m3s from existing pcps and leases. Plus the new retail price will be driven down to make EVs even more competitive. Only thing that appeals to me with pcp is the whole flexibility.

I have noticed the leasing prices have jumped this month compared to last month.

 

[gangzoom]

Research online suggests a 50% depreciation over 3 years

That's for a normal car, Tesla's of all age perform much better. Our 3.5 year old X, pre raven, MCU 1, AP2.0 still retails for £50kish, we paid £72k for it in March 2017, that's 30% depreciation in over 3.5 years and despite newer hardware been introduced all the time by Tesla.

 

[White Eusebio]

That's for a normal car, Tesla's of all age perform much better. Our 3.5 year old X, pre raven, MCU 1, AP2.0 still retails for £50kish, we paid £72k for it in March 2017, that's 30% depreciation in over 3.5 years and despite newer hardware been introduced all the time by Tesla.

I found a site quoting 50% after 30 years for a Tesla, though I agree that Model S depreciation seems a bit lower so far

 

[Mr Miserable]

The difference with the Model 3 compared to other cars is the very low depreciation. Whether it will stay low is another matter.
I think the leasing companies have overestimated the depreciation and so will stand to make a tidy profit at your expense, if you lease.
So unlike other cars I don't think leasing is a good option at the moment for Telsas.

 

[Fraank]

I think the leasing companies have overestimated the depreciation and so will stand to make a tidy profit at your expense, if you lease.

That may explain why I was able to increase my mileage from 9k to 18k at no cost with Leaseplan!

To OP, I went for leasing because I also had the Ltd company benefits. But even if going personal I still liked the 2 years to dip my toe in to the world of EVs. I'll probably extend this lease until model Y is around, and then consider the options again at that time.

My last car was PCP and unfortunately a diesel VW dying diesel gate. Ended up keeping the car another 1.5 years past the 4 year term, which allowed some equity to build - and got my deposit back when I sold it at least! But did put me off PCP rather.

 

[gangzoom]

@White Eusebio Personally I wouldn't have any hesitation buying out right with a plan to keep for the longterm. That's what I've done with our X and its amazing how time flies, but the car just remains fantastic. I cannot believe my daughter could barely sit up right by her self when we first ordered our car, and now she's going to school!!

Whats amazing is in 3.5 years of ownership the only 'maintenance' I've had to do is take it for a MOT recently, and Tesla re coming to my house in a few weeks time to upgrade the AP computer to Hardware 3.0, and if I wanted to they will now upgrade the MCU to the latest version.

These are great cars from the longterm to ownership point of view, which is something I think that gets lots when every thing these days is about having the latest/'best' hardware .

 

[Medved_77]

take it for a MOT recently

No MOT due on my 3 for a while but had been wondering if all mot centres are equipped with the tools and knowledge to do a MOT on an EV.

Did you need to research somewhere suitable?

 

[LongRanger]

nah, it’s basic roadworthiness and emissions. So roadworthiness.

Tyres, brakes, suspension, lights, seat belts, is anything hanging off.

Hybrid, electric and hydrogen fuel cell systems: guidance for MOT testers

The biggest issue is probably jack pucks check. Oh and that they understand it is proper high voltage not just a bigger 12v battery !!

 

[gangzoom]

No MOT due on my 3 for a while but had been wondering if all mot centres are equipped with the tools and knowledge to do a MOT on an EV.

Did you need to research somewhere suitable?

Used a local independent garage I've used for years. No issues but I had to show them how to put on the fog lights from the menu.

 

[tomorrowman]

nah, it’s basic roadworthiness and emissions. So roadworthiness.

Tyres, brakes, suspension, lights, seat belts, is anything hanging off.

Hybrid, electric and hydrogen fuel cell systems: guidance for MOT testers

The biggest issue is probably jack pucks check. Oh and that they understand it is proper high voltage not just a bigger 12v battery !!

Emissions - Now that has me worried.

Jack Pucks, just purchased a set for £12 from Amazon, the chappies at Kwik Fit where a bit confused about the missing jack points so I thought I'd make is easier for them

 

[eight]

Definitely need jack pucks. They also fit Maseratis

If you have a ltd company buying through that could make sense as the M3 depreciation is so low?
We previously company-leased a Leaf over 3 years for 150/m and currently have a Soul, halfway through another 3 year contract at 170/m, both plus vat. A co can claim back 50% of the vat on the lease. On a new EV purchase you can claim 100% capital expense in the first year, or 18% per year if used, but no vat reclaim unless it's business use only eg a taxi.
Reason for us renting rather than buying were the newness of EVs and wondering whether they'd depreciate like a stone and improve massively tech-wise.
Early on they did lose money, but the tide has turned now and last time I looked things like used Leafs had gone UP in value pre-covid. Tech-wise I think it's been a string of steady improvements rather than anything ground breaking to knock used values.

Tesla leases weren't good value at all when we looked a couple of months ago, M3 was twice the price of a Leon Cupra for example.
When used values seem to be holding up so well you'd expect cheaper deals.
Everyday ICE cars classed as appliances are going to be worth buttons in years to come - should you buy an ICE now - probably not - just rent it.
On the flip side the EV is the futureproof alternative, so if you want one buying electric makes IMHO more sense than ICE.
If you're a private buyer it's just a case of weighing up likely improvements in tech and whether you'd kick yourself in three years time when the new Model X/Y/Z can fly and do 1000 miles per charge. Battery day proved there will be improvements going forward, but there's been nothing yet that suggests EV tech will change drastically enough to knock used values. Yet...