Model 3 residuals on Black Horse PCP

[pdk42]

I've been debating whether to go lease or PCP. I got a decent lease quote from Octopus EV and did a quick comparison against the Tesla/Black Horse PCP.

Parameters:

LR AWD + tow bar. £50,810 invoice. £47,310 after grant.
24 months
10k miles per year
£14k trade in on my current car which is used for PCP deposit​

Octopus EV lease - £597 x 23 + £1,792 initial = £15,523 total
Tesla/Black Horse PCP - £363 x 24 + £14,000 initial = £22,712 total

So - almost £7k cheaper on lease. That seemed a bit crazy to me at first, but then I looked at the residual on the PCP ...

£27,630​

That seems pretty miserable on a car with an invoice value of £50,810 after 2 years and 20k miles.

What's even more odd is clearly the lease company think the depreciation will be less than £15,523 since otherwise they'll lose money on the lease.

Am I missing something, or is the Tesla residual just plain wrong/stupid?

 

[Uncle Paul]

Leasing company has no history of resales for Model 3. Will be pretty conservative until they can get some hard dats.

 

[pdk42]

Leasing company has no history of resales for Model 3. Will be pretty conservative until they can get some hard dats.

I guess they're short on residual history, but it seems they're underestimating it by quite a lot compared to Tesla themselves (or at least, by Tesla's chosen finance partner in the UK).

 

[TezzyMod3]

It’s in another thread elsewhere on this forum.

long story short, due to some issue between HMRC and Mercedes, car manufacturers now use very low residuals. Something to do with VAT?

I went for PCP in the hope my residual after 48 months means it’s cheaper to run than Lease

 

[Durzel]

Something to bear in mind is that some lease companies will let you buy the car at the end of the lease, or extend the lease by another year.

When I was looking into leasing recently I was told that Leaseplan (one of the major ones) is currently doing this. Obviously that could change in the next 2 years, and you don't know what the buy price would be until the end of the lease, so it's a gamble, but it's something to consider.

I do wonder how it makes sense for them though. If they've only had £15.523 from you and the car cost them ~£50k, if it's only worth £30k after 2 years - which seems likely - they've lost more in depreciation than they've had in payments from you. Where's the profit?

I think I'm likely to go lease because of the numbers you highlight.

 

[Cherub77]

I think if lease companies buy in bulk they get a discount, not sure about Tesla

 

[gangzoom]

So - almost £7k cheaper on lease. That seemed a bit crazy to me at first, but then I looked at the residual on the PCP ...

£27,630​

That seems pretty miserable on a car with an invoice value of £50,810 after 2 years and 20k miles.

The final payment on a PCP contract IS NOT the estimated residual value.

The whole concept of PCP was originally conceived to con people into an endless debt spiral, the GFV/Final payment was key.

The GFV/Final payment is SUPPOSE to be less than the residual value of the car, at the end of the PCP deal you can use the difference between the residual value and the GFV as a 'deposit' towards a new PCP contract, hence the debt spiral.

However as leasing became more popular many car manufacturers realised people were more attracted to a low monthly payment than having a deposit, so over the years the GFV has become bigger to allow monthly payments to drop. This also allows the con men/car sales team to play their favourite line 'buy an appreciating assets, rent a deprecating one'.

Finally a large GFV also allowed manufacturers to "hide" large discounts without destroying true residual value, though Nissan didn't manage that with the 2014/15 Leaf deals.

HMRC had now caught on to all this, and put in place firm rules on the difference between lease/PCP deals.

@pdk42 You need to decided if your likely to keep the car long term or not. PCP will 100% give you the option to own, but lease deals woudlnt.

It doesn't matter how you pay, your still funding deprecation. What matters is if you want to change cars in 2-3 years. Lease deals are only cheaper if your sure your going to swap cars at year 2-3, longterm they are much more expensive than out right purchase be it PCP or cash.

 

[pmg102]

I did numerous spreadsheets, covering cash (personal loan), PHP, lease and PCP.

I plan to keep the car 5-6 years, so PCP seemed like the best balance... didn’t have as much of my own capital tied up, but a predetermined price at end of deal. I appreciate that the end payment should be less than car value.

Also had to consider company car lease with 0-2% BIK, but their prices were quite high, would be paying the higher 16% till April, and no guarantee to purchase.

If you just want to change after 2 years, then lease seems easiest and most transparent

 

[Durzel]

Can someone explain to a lease/PCP simpleton like me..

I'm looking to buy a P+ M3, currently £57,690 in the spec I want. I don't know yet whether I'd want to keep it for more than 2 years, it's possible, maybe even probable, but not certain.

I've rung around for leasing quotes in past few weeks and the best one worked out at £23,495 total spent over a 9+23 term, with (currently) an option to extend the lease by a year or request to buy the car. This is a 15k miles/year contract, I know I'm guaranteed to do 12k.

At the end of that 2 years would that 24-30k mileage car be worth £34,195? (59% of its original value). Hard to say for sure but I don't imagine it would be worth considerably more. 40% depreciation seems roughly par for the course.

So in that scenario - why wouldn't I lease? I've got the capital to buy and whilst it won't do much over 2 years without high risk investments or property it is still available to me.

The only way I can see I can lose in that scenario is if a) I want to buy the car at the end of the two years and the leasing company no longer allows it meaning those monthly payments were just a rental cost, b) the buy price is ridiculous - which seems unlikely as they'd still have to try and sell it on the open market themselves, or c) the car is worth a lot more than £34,195 at the end of 2 years, again this seems unlikely given it will have a minimum of 24k miles on it.

I keep reading people saying buying outright is always the most cost effective method, but if that's the case I'm missing something about these numbers that isn't obvious..

 

[anon37485]

Don’t forget with a lease the yearly ~£310 luxury car tax is paid (2-6), so that’s another cost to factor in when comparing like for like.

 

[gangzoom]

I keep reading people saying buying outright is always the most cost effective method, but if that's the case I'm missing something about these numbers that isn't obvious..

I'm looking to buy a P+ M3, currently £57,690 in the spec I want. I don't know yet whether I'd want to keep it for more than 2 years, it's possible, maybe even probable, but not certain.

I've rung around for leasing quotes in past few weeks and the best one worked out at £23,495 total spent over a 9+23 term, with (currently) an option to extend the lease by a year or request to buy the car. This is a 15k miles/year contract, I know I'm guaranteed to do 12k.

I've moved your final question to the top as the only way to answer that is to work backwards.

Lets assume you want to keep the car 5-6 years, which is actually quite normal - average age of cars on UK roads is currently 8 years.

On a lease deal, changing every 2 years at a cost of £23,495 you will have spent £70,485 by end of year 6 and still own no car.

A 6 year old P Model 3 will still be worth £15K easily if 6 year old Nissan Leaf prices are a good gauge of longterm EV prices.

So at 6 years a lease deal will have cost you £28K more assuming you sell the Model 3, but if you keep hold of it for another 2 years than over 8 years then the cost difference goes up to £36K.

Ofcourse the advantage of lease is you get a new car every 2 years, but you have to be upfront on acknowledging you're paying for that privilege of driving a new car every 2 years compared to owing out right.

A lease is a good way to own a brand new car every few years, but having a brand new car every 2 years isn't a cheap motoring longterm, which is what sometimes leases are been seen as.

 

[Durzel]

Appreciate you taking the time to reply, and were it not for the fact that Leaseplan appear to be allowing people to buy the car at the end of the lease I'd totally agree.

But since they are, and assuming it stays like that, how am I losing if I decide to buy the car at the end of the 2 years? I'm just deferring the capital expenditure, aren't I?

I'm definitely not looking to keep it for 6 years, for what that's worth. 3 years is possible, beyond that is unlikely. In the scenario of only keeping it 2-3 years my lease payments have effectively been the same or similar to the loss in value in depreciation?

Granted over a longer term than that the car starts depreciating less whilst the lease payments stay the same, so the balance shifts. I can see how it definitely wouldn't work for a 4+ year ownership plan.

 

[gangzoom]

I'm definitely not looking to keep it for 6 years, for what that's worth. 3 years is possible, beyond that is unlikely. In the scenario of only keeping it 2-3 years my lease payments have effectively been the same or similar to the loss in value in depreciation?

Lease/PCP/Cash all of these options are essentially funding deprecation if your working on a 2-3 year car change cycle.

Yes if you don't want to commit capital, lease/PCP essentially functions the same as cash purchase than sale without the hassle, but changing a car every 2-3 years isn't cheap, regardless of how you fund the deprecation.

Just for interest our X was £71K invoice price March 2017, the cheapest non-write off X for sale on Autotrader is £55K, even if we were to sell for £50K that's in effect £21K deprecation in 30 months, that's less cash value 'lost' than a £23K lease deal on a £57K P Model 3.

If you have the luxury of out right purchase do all the sums and options before assuming lease is cheapest, when we bought our X Tesla was offering 2% APR rates on PCP and some kind of weird 'purchase for X amount' in 3 year time PCP deal. I did lots of calculations but in the end went with cash and very happy with that decision.

Just at it happens we are now planning a big house extension, if our car was on PCP/lease there is no way I could now justify spending £1000+/month needed for a new X on finance as we all know property is a much better way to spend cash than on any car. But since our car if fully owned with no on going finance costs I don't feel bad keeping it .