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PCP vs Tesla loan

Teza

Member
Aug 24, 2020
51
3
Uk
Hi all,

sorry if this is a silly question but just wondered if anyone had any views on the Tesla finance options and which ones are the most financially viable.

I plan to do approx 10000 miles a year and would like to own the car (unless financially again this doesn’t make sense) at the end of it but don’t want to put down a large sum of money to ensure I have adequate cash flow. This would be a personal purchase.

Any views are greatly appreciated

thanks,
Teza
 

JonA

Member
Nov 26, 2020
11
13
UK
I'm opting for a Tesla loan with a large deposit as the lowest cost option. I did dither a bit, as I think the best option may be to never own a car and just pay a regular monthly fee, especially for EVs. Battery tech could leap forward - faster charging / greater range - and that would devalue my car.
 

phil4

Member
Sep 8, 2020
292
160
UK
Just remember that with the loan you've more risk.

IE. you can buy the car on PCP, and either hand it back or buy it by paying the final payment. So if it's gone down in value, you give it back losing nothing. If it's gone up, you buy it at the pre-agreed price, knowing it's more. Or trade it at that higher price.

With cash or a loan you've far more flexility for sure, but it's your asset so after that loan period if it's worth less, you're out of luck. If it's worth more you still have the asset so that's fine.

So if I were you I wouldn't just think about the monetary amount, but also how confident are you of the value at the end of the loan.
 

Glan gluaisne

Supporting Member
Sep 11, 2019
2,782
2,701
UK
Personally, I've always followed the sage advice of Polonius: "Neither a borrower nor a lender be, For loan oft loses both itself and friend,
And borrowing dulls the edge of husbandry."

Never, ever, borrowed money for anything, including buying a house. Always bought everything with savings - if I can't afford it, I don't buy it (my father was a bank manager). Always remember that TINSTAAFL
 

SpanishJ0n

Member
Sep 1, 2020
26
4
Newbury UK
IE. you can buy the car on PCP, and either hand it back or buy it by paying the final payment.

Erm - if you buy on PCP and hand it back you've just paid for the cars depreciation over its most significant period and have nothing but memories to show for it, meaning you have to do it all again and the debt cycle continues. If you pay the balloon payment you will have effectively taken out a high interest loan on the depreciation amount.

So if it's gone down in value, you give it back losing nothing. If it's gone up, you buy it at the pre-agreed price, knowing it's more. Or trade it at that higher price

it will have gone down. I guarantee it.

Personally I would take the low interest loan any day. PCP is a mugs game. I can see the benefits to be sure, but the result is that people tend to 'buy' cars they couldn't otherwise afford with no hope of ever meeting the balloon payment so they are in perpetual debt.

Spanish
 
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Rustybkts

Member
Feb 8, 2020
525
304
Leicestershire
I buy to keep for longer than most PCP's and normally for at least 6 years.
In the longer term buying is far cheaper than sucessive PCP's as you are forever paying for the worst depreciation.
 

SpanishJ0n

Member
Sep 1, 2020
26
4
Newbury UK
To prove the absurdity of PCP I have just gone onto tesla.com and ordered a pretend Model 3 LR with 19" wheels. Price £49,440.
With PCP I would pay £9100 + (48 * £629) = £39,292 with a £19K balloon. So if I was to hand the car back then I have just paid nearly £40K and have nothing to show for it. If you pay the balloon you will have borrowed £39K at 4.9%.

Spanish
 

phil4

Member
Sep 8, 2020
292
160
UK
I don't think that's absurd though. I've not said PCP is cheaper... I'm not talking about how much it costs, I'm talking about the risk at the end. It's based on a gamble that the car is worth £19K.

Lets take your Tesla example. LR at £46,990
Tesla Loan, £9000 down, over 48 months - £854/mo
PCP, £9000 down, over 48 months - £520/month

So over the 48 months you have paid £49,992 and have a car... which we don't know how much it's worth.
If you do the PCP, you've paid £33,960. You have no car, but you can have it for the preagreed sum of £18,476.

So yes, if you do the PCP route you've paid more... but equally if the car is worthless/worth very little, you've only paid £33960 as you hand it back. If you went the loan route and it's similarly worthless you're £49,992 out of pocket... that's a lot more.

Yes it's an extreme example, but makes for easy figures.

If the car is worth a lot more than the preagreed sum, you can buy it, yes you paid more, but you've also got a car worth more than it was estimated to cost.

And that's really my point. It's not so much about the actual £, it's about being able to reduce the risk via PCP, yes you pay for the privilege... but you do at least get the choice and reduce the risk.

Oddly I'd have thought this even more important where we're not talking about traditional cars, where every few years a new car has slightly different styling, 10bhp more and slightly nicer radio... In 2-3 years your Tesla could become a museum piece, because of a breakthrough in Solid State Batteries, H2 refuelling or any other number of things that could make the car worth a shed load less in the very near future. I'm not saying it will, but it's possible.
 

Rustybkts

Member
Feb 8, 2020
525
304
Leicestershire
With the range of even the SR+ I very much doubt any Tesla would become a museum piece.

The Roadster is a very high priced museum piece even without Tesla offering a new battery. Prices have held well.

I agree it is not the same as their current models but the S has certainly held far higher prices than equivalent highly priced ICE's as they tend to plummet.
 

doats1

Member
Sep 11, 2020
110
70
London
Personal opinion here, but I don’t understand why people want to maximise the resale value of their car; I don’t see car ownership that way. I only ever sold my cars if it couldn’t do what I needed it to do anymore, and then I just sold it for whatever it was worth.

I got the Model 3 as a long term car, and unless the car starts to really run like rubbish in the future, I’m keeping it for as long as it will last.

My view is the loan is better for eventual ownership.
 

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