PCP - Equity at end of term

[PlugMeIn]

I recently bought a new Enyaq on PCP over a 36 month period. I'd intended to pay cash, but the PCP deal incentives is too attractive - and the cash stays in the bank at 5%.

The car was £45,200 with a £800 dealer contribution. It's £659 a month for 35 months with a £21,312 balloon / GFV.

The 0% deal seemed good and I want the option to purchase it at the end. I imagine I will do this: I don't feel the need to have a new car (to put it on context the last car I bought was 8 years old and I usually pay in Cash).

However... I have noticed that there are a number of 36-month leasing deals that do have a lower monthly payment than the PCP. I don't know if these have hidden fees.

The question I had was... generally, if people do decide to "trade in" their three-year old cars at the end of the PCP term, do they find generally the dealers will give them a higher trade-in price than the GFV / balloon? So they can roll a little extra equity into their new car? Or, if you are always going for a new car would it make more sense to lease?

TIA

[dtwatcher]

I decided to lease our enyaq due to the depreciation of the car plus since BEVs are still relatively new, the technology will change quickly so most likely will end up getting something newer after the term.

[Aragorn]

Traditionally, the GFV is set a little less than the car is worth, intentionally so.

When you reach the end of the term that gives some options:

You hand it back, the finance company usually "wins" as the cars worth more than the outstanding finance.
You trade it in, the dealer/finance company "wins" as you've bought another car.
You buy it, the finance company sometimes "wins" as some people will refinance the GFV.

For trade-ins, the dealer essentially buys the car from you at the trade in price, pays off the remaining finance and whatever is left is used as a deposit for your new car. So yeah, you will usually carry forwards a little equity. This is designed in, they want enough left over to tempt you into another car, but not too much that you might be tempted to actually pay it yourself and keep the car!

The main issue is that residuals are currently all over the place, especially for EV's. If the GFV ends up too high, then you "win" as you can hand the car back and walk away, and the finance company takes the loss. If they've massively undershot, then ofcourse you have the option of buying it, selling it on, trading it in etc.

With leasing, you lose that flexibility at the end, but gain the certainty and reduced hassle. Theres no haggling over trade ins or trying to buy it or refinance it etc etc. It just goes back.

[PlugMeIn]

Thanks all for your responses - this is very helpful.

I

[orrery]

I've always been ahead at the end of the term. If you keep your eye on the amount remaining on the finance, and on the value of the car you can usually see when the two co-incide, and that is (thus far, in my experience) well before the end the PCP period. It is worth getting a quote from the finance company, as there is frequently an additional saving from interest that isn't owed.
If you look to buy a new car, the dealer will take your old one and clear the remaining lease for you as part of the transaction.

[ricky10]

With PCP the final ballon is fixed but the cars valuation can change.

The calculus becomes if you want to pay the final ballon and keep the car vs what you can get on the used market.

With lease deal you will also likely to have the option to buy the car at the end of the lease but from my experiences the end of lease valuations are usually extremely high something like 10-15% higher than autotrader market value. The lease company obviously trying to make money on the car.

[Smk82]

How long before the end of your term do you get contacted so you can make a decision generally?

[ricky10]

How long before the end of your term do you get contacted so you can make a decision generally?

With any finance you can ask the termination cost at any time of the finance deal. With Skoda finance they spell it out on their website. With private lease or contract lease, you can call up lease company for the quotation.

[Smk82]

How long before the end of your term do you get contacted so you can make a decision generally?

With any finance you can ask the termination cost at any time of the finance deal. With Skoda finance they spell it out on their website. With private lease or contract lease, you can call up lease company for the quotation.

Didn’t realise they had. Website for this! Great thanks!

[Smk82]

On the options at the end of the pcp - has anyone decided to keep the car and refinanced? If so what kind of terms were you offered? (If willing to say of course) (would probably bank loan it depending on APr, but obviously look at all options)