I drive a 12 year old Golf and I put my money into investments - I don’t care about the Jones’s or want to keep up with them. I would ever lease a car..

My mum & dad brought two brand new cars on finance. Both cars sit on their driveway all week long as my mum works from home and dad has a company van. Combined cost is £750 pcm. Brother and his wife both have brand new cars combined cost of £600 per month, they rent a house and will never get a mortgage.due to their low incomes and high outgoings. I brought my little car for £1400 outright and it costs me £30 per year tax and £33 per month in petrol. Personally I think cars on finance are crazy money unless you can really afford it.

This is something I am thinking about. I actually bought my car cash and have always bought it cash

As an accountant I think this video is great for finance novices and to give insight into the reality of the ‘deals’ that dealerships are offering. That’s a subscribe from me.

Cars will always cost money regardlessof method. In your example if you own the five year old car it will require more cost over time to service, mot the vehicle and pay for consumables, tyres, brake pads and discs. These add up even after the monthly payment has finished for the buy examples except cash outright. For the cash buyer you'd need to save the same balance again to buy a newer car once the old one approaches the five six year old mark if you want to keep reliability. Lease deals throw in free ved and full breakdown cover for the period you have the vehicle too. As you succinctly put which route depends really on the cash in your bank and the car you want!

One thing I hate is learning financial eduction after years of throwing money down the drain. When my son gets to working age I will be educating him thoroughly on how to save and invest.

I put my car on 0% credit card....it cost me 2k in minimum payments over 3 years. In those 3 years I made 18k of co car payments and over 2k of tax rebates, invested to my ISA :) Will sell, clear debt and start again! Thanks for vid!

An informative video thanks. One thing I would say is there is an opportunity cost when buying in cash, if you spent £16,498 on the car in cash, and the option to finance via a personal loan for example, would cost £17,685 over the 5 year period that would mean the opportunity cost is tying up £16.5k to save £1,187. The same £16.5k invested at 4% over the 5 year period would make £3,646 invested, so you'd have a net gain over the saving of cash by financing and investing the money instead. Obviously there are a wide range of variables, i.e. discipline to follow this approach and if your buying a £5k car then its probably best in cash.

There are hidden costs with leasing and PCP. The dealership will usually expect the car to be mint, or near mint when it is returned. Any minor scuffs or dents you pick up will be heavily penalised. It usually ends up being cheaper to get these fixed by a body shop ahead of returning the car, but costs can still be in the £1000s. Whereas if its your car you can make the call whether its worth going all out fixing these, or if a less all out job or even a bit of t cut will do.

I buy older cars for cash. Last car I bought was a pug 308 1.6 hdi with 46k. Tax 30 quid a year. Paid 900 quid. Gets 55-60 mpg. Insurance is cheap.

I like to pay cash for a car, as you should never borrow money to buy a depreciating asset. Great video, with a good break down of the figures..

Or buy a 5 year old Ford Fiesta for £6507 and run it for 5 years.

The only part that was missed out on the cash side was how long it would take the average buyer to save up £16k to buy the Fiesta. Also on leasing beware of the condition on return as often little scrapes and dents and wheel scuffs can get very expensive with some companies.

Mama love you guys and your channel but have to disagree based on personal experience of new car every year for 11 years. Same monthy amount + - £20 my budget. PCP interest is of no concern if you end contract and enter new each year. Main loss is Vat on new and initial deposit. Equity is good at 1 year old with strong selling power having low miles warranty etc. No budget needed for MOT, Tax, Insurance breakdown etc... just trouble free motoring. 5 year loan leave me with 5 year old car that will need servicing maintence and all the other wear and tear cost like tyres exhausts etc. then all i'd be doing is taking out another 5 year loan for another car so personally see no point. I would however choose the buy option on retirement. 8 cars i've had to date and never seen under the bonnet on any of them, even gets valleted for free. Charge me higher APR vs deposit all day long as im changing for new in 1 year. Dealer loves signing me up for high APR vs deposit as its good for their books. What i dont tell them is im bringing back in 1 year to swap for new and seen as they want to sell new cars then they will do just that. Dealers make 3-4 times value of your car reselling PCP on 2 and 3 year old cars. Thats what you should remind them when they ask for another deposit and when you bargin the part exchange value...and if they dont listen opt for PCP with higher interest. For me the APR over 1 year wont equate a full set of wipers. Just maximise on the equity and swap following year. Mileage penalties on PCP are over the 3 year contract term so not relevant if you take back in 1 year as is other contractual garbage....its torn up when you buy another new car ! ***You can buget £200 for a loan but in real terms over 5 yrs add up costs for tax,mot service wear and tear not to mention other nasty suprises you cant foresee. Even if you were lucky and didnt even need to change a tyre in that period on year 6 most people will be looking for another car....and so it goes on ...another loan etc. Sorry but tried and tested on my part ..same budget no expense, no suprises, new car every year....no brainer 👍 ...just dont get suckered with the deposits and remember dealers are there to do one thing only......sell NEW cars! So take advantage of that fact and play them at their own game😉

I have recently got rid of my PCP (voluntary termination) and am working towards buying a car cash while I can take advantage of working from home so not needing a car as much! Great advice as always

With leasing and / or PCP I was under the impression (maybe falsely) that if there was any problems with the car, you know, if it had mechanical issues, the dealer would not only have it fixed at their expense but give you another vehicle to use in the meantime?

the other factor we've come to realise at the end of our 4yr PCP deal is the car can fall into negative equity, leaving us no choice but to return the vehicle. So PCP can effectively be a lease as in our case. Was a wonderful car to drive, so no regrets, but negative equity is a highly likely scenario apparently, despite low mileage over the term and high spec vehicle.

Very straightforward language making this an easy-to-understand video, thank you. Regarding PCP’s, the statement that you are only borrowing the difference between the purchase price (after deposit, if any) and the MGFV is factually incorrect. You borrow the whole amount and you pay interest on the whole amount. The reason the repayments are affordable, is that you are only amortising the capital difference between the p.p. and the MGFV. It is not a smaller loan. Just check out the interest you will be charged (total cost of credit) and it will likely be a scary figure. APR’s tend to be a lot higher than personal loans. Few and far between nowadays, but zero interest deals on a PCP can be attractive. Manufacturers and dealers are making more on PCP’s than they are on the cars.

So paying cash is the ideal way to go, but they'll always try to get you into a different direction to make more profit.

Thanks very much indeed for such a clear and well presented explanation. I'm planning to get a new car in Sep 2021, and have been struggling to understand which might be the best choice between another PCP or Lease deal. My current car ends it's PCP next month, and I'm going to pay the RV amount because the actual market value of the car is a good bit higher than the dealer calculated it would be. So I'll sell the car and then put this money towards my next car deal. Until I watched your video today, I had actually persuaded myself that a lease deal would be right for me, and also I'd never even thought about cash because of the depreciation which occurs in the first 3 years. However, thanks to your clear explanation and spreadsheet, I've decided to buy my new car with cash. Just subscribed to your channel as well :)

Thanks for this video! 🚗 Defo super useful!

New car prices have gone up significantly since they brought out leasing for Mr and Mrs normal person. Dealers prefer that you lease or take up whatever scheme they are trying to sell you rather than buying. I have never bought a new car and have been driving for 40 years. 2 -3 year old cars with less than 30K miles on the clock seems to give the least worst depreciation while still being a modern and reliable car. I mostly keep cars for 10 years till they are technically worth nothing and still keep driving them till they expensively break down. Ego's are expensive to maintain when it comes to cars as many of my friends and work colleagues have found out over decades, one in particular inherited enough to buy a house up north where he came from but spent the lot on cars, one after the other till he got bored of them (as you inevitably do).

That was great and really helped me understand differences between the options. Well done and thank you.

I'm in my 8th year of PCP, first four were with a 0% interest Mazda, zero deposit and servicing pack. Then with BMW on a 435d, 0% interest, they paid the 7K deposit and servicing costs. PCP has worked out pretty well as my income increased over the first term, I increased my monthly payments slightly for the next car, I've not paid a penny in deposits, interest or servicing for the best part of eight years, so there are deals to be had. That said, I've saved some money and I want to buy my next car if possible

A very informative video, I feel like since I would do this through a business leasing is my best option just because I don't think after 5 years I would want the car that I had initially bought and paying 5k more over 5 years to own a depreciating asset which will cost more to maintain and not provide as much joy. Using liquid for a depreciating asset makes no sense personally, i'd rather put that into proper investments than save for a car. Mileage for the lease is really the worst side of it in my opinion and if you have a business the prices decrease quiet a lot but remember to calculate VAT. Great vid mamafur

thanks s much for your video! i understand it so much more now! i was thinking about getting a HP for my first car, paying a high deposit, but i didnt really think about personal loans too. such a good idea

I think that you have missed the best option , buy a classic car , no tax , no MOT , cheap insurance , more fun and it increases in value the longer you keep it. All my cars and bikes are over 50 years old , except my daily runabout , and are increasing in value. Why would you walk into a dealership , hand over £20,000 for something that will be worth £8,000 in four years time , when you could buy a £20,000 classic car that will probably be worth £25,000 in four years time.

Totally agree 👍 Cash is king. Another great upload 👍👍👍

I thought with PCP you are paying interest on the ENTIRE value of the car, not just the 'portion' of the value you have borrowed. Additionally, the price of the whole car is what appears on your credit file. Can't see PCP ever making sense for me, even on a 0% deal as I'd never buy it outright.

You can ask for a quote at the end of the lease same as pcp, the dealer would usually quote that car at the market rate if you really want to buy it and re-finance to keep it

I have found it depends on the car, I have had cars that deprecated more during the lease period than we paid in lease costs.

One of the few economic upsides of living in London - NO CAR NECESSARY!

I dont agree with you here. I think your assumptions on PCP and Leasing are not really valid. Also, there is little actual value in owning a depreciating asset, so you would be silly to use savings if you had the disposable income to pay for a cheap loan. There is to me also no comparison between a PCP and Leasing deal, as in both cases you almost always end up at the end of the initial period with zero or very little equity in the car, so you may as well lease the car for the period and save yourself money. You can always buy an ex PCP trade-in for the same as the PCPs bubble payment anyway. On leaseloco today a 1.0l st line Ford fiesta petrol is £243 a month for 24 months + £243 admin fee at 10k miles /yr or just over £6k in total. If you buy a fiesta you lose more than that in its value in 6 months. I think for most people, who renew their cars as soon as they've paid the last loan off, leasing works out cheaper over a longer period of time.

Really informative, as always. 👌 I'm sharing!

This is why it is better to wait/save or go for a cheaper car with cash. Interest is a horrid and vile concept and it traps people and plays on their vulnerability. Keep clean, buy cash and don’t over commit.

CASH IS KING! Cough cough- Dave Ramsey . Great video. Glad someone has seen the light. Tbh I already new all this, but this is my soap box. And I get so annoyed when people upload vids justifying pcp and loans etc.. when in reality it just gets people into debt. My opinion is- if your can’t pay in full then you can’t afford the car. Simple! Have a bit of patience and save up. Plus if you have the cash in full, you can walk into a dealership and strike a deal to get some money off. You hold the power. I did that a few years ago and the guy just presumed I was financing the car, but when I said no it’s a cash purchase he looked astonished almost like it never happens. Great feeling that!

Good video. Negotiate a big discount and pay cash upfront will work out even cheaper compared with the others. If finance of any kind is involved it's always going to cost more in the long run. Common sense.

Hi, great video, but wouldn’t another option be to lock £16.5k away for 5 years, earning (maybe) 8% per year. Then take out a personal loan at 2.8% to fund the car purchase. After 5 years you’d obviously own the car but the invested amount could be now over £24k. You touched on this early on in the video but I didn’t see it followed through :)

You provide awesome bit of analysis, keep going!

I am glad I found your channel, quality content. Thank you for these very useful videos. 👍👍👍👍👍

I bought 2 cars in last 6 months on interest free credit cards

I have to thank you for making this! I started with leasing a new car for 2yrs and will now be buying a cheap older car outright. Leasing kinda made sense because I didn't have a large cash buffer, but I hate mileage limits and the worry of hidden fees at lease end! My only worry is that I'll miss the features you get in a new model - so I plan to mod-in some sort of reverse camera and also just use a tablet with Android Auto.

I bought a 2 and a half year old Vauxhall GTC (petrol automatic) with 11k on the clock for £7k. If I keep it for 7 years it will be 10 years old and will have cost me the equivalent of £83 a month if I just chuck it away when I've done with it. I've had it almost six years and bumped it up to 23k miles and it owes me nothing apart from a couple of tyres. It is still worth £7k so at that point, it has been a free car purchase. I always buy cars a couple of years old that depreciate fast in the first three years and then level off. .

Brilliant video idea as my sister is buying her first car later this year 😳 one question however with a second hand car the thought of dealing with it breaking down etc and expensive mechanical costs is the thing that puts people off...

Awesome content 👏 thank you for this.

Good video, I'd love to know where you found a savings account giving 4% interest, most UK accounts are 0.01%

The pcp will normally be a far lower rate than HP which makes it cheaper than HP, whenever I’ve ran the numbers anyway

In the interests of completeness, the cash NOT spent when leasing over 5 years could also be invested? About £50/month in your example.

Buying cars gives me a headache! Houses are so much easier!

The problem with paying cash repeatedly is that the first time you do, you effectively have to buy 1.5 cars during the term of that first car: upfront for the car and then saving the difference between the expected residual value of that car when you sell it, and the price of the new replacement car (I've called that value 0.5 car for convenience but it could well be more). You will get that 0.5 car capital back.... eventually....when you no longer need a car or when you die....but isn't that capital more worth having now? That is the attraction of lease (or new Subscription rental) options. It leaves you with no residual value and that's arguably a good thing - but if course it depends on the value of deal. I also frequently find dealer HP offers are often actually better than personal loan offers. For starters 0% APR w/50% deposit is a fairly common HP offer that can't be beaten. But even if not 0%, dealers can still sometimes offer a better (don't accept an equal!) personal loan quote, if you can evidence the quote. In this mobile internet age we are not the captive audience in the showroom we once were! Also HP is secured on the car, so should in theory be cheaper than an unsecured loan. Also, PCP is just another Hire Purchase instrument, but will pretty much always be more expensive than traditional HP because 1) you'll possibly getting stiffed by any significant variance, above or below, from the expected mileage; and 2) you finance the balloon as well the regulars - the balloon is just another regular HP payment that happens to be larger and at the end - it's not correct to say you only finance the regulars in the middle - the balloon is effectively an expensive interest only loan for the length of the term!

Think you should of added in a section for break down of the car. If you own the car you pay this entirely yourself Where as if you lease or PCP the car this cost Is covered.

I take the best PCP deal with all the dealer incentives, then pay it off with cash in a couple of days after picking the car up.

Would the lease deal not involve you having a two new cars over the 5 year period compared to the one car with the other deals, plus no road tax and no out of warranty charges which the other deals may involve. Also with having lower payments would you not have more money to invest, £222 pounds extra compared to HP and PCP which should make a return to make a lease cheaper than PCP or HP. Thanks for the video.

Only issue is you could have got a Personal loan to purchase the car after the PCP deal which would be less APR than the HP option you went for.

@2:45 you describe a car bought in cash as a liability. It not. It's an asset. A depreciating asset, but an asset none the less. You can realise the value of the asset at any time by selling it. A lease, PCP, HP on the other hand is a liability. You are liable for the payments for the whole term. If you sell the car you have to pay to settle the agreement. Also if something happens to the car, you still have to pay for it even if you don't have it. Insurance would hopefully cover you but there are uninsured losses and often a short fall in an insurance settlement that you would be liable for. This is technically true of a cash car too but you don't have the payment every month which may well prevent you from buying another. Look at it this way. If you go bankrupt a car bought for cash would be put in the Asset column as something that can be sold. A lease etc would go in the liability column as a financial commitment you are legally liable for. You could not sell the car without first wholly paying off the agreement. It's not your car. So in a fix, you can sell a cash bought car car and possibly avoid bankruptcy altogether and buy a cheaper one. You might have covered this later in the video. But as soon as I heard "it's a liability" I stopped watching.

My mantra, buy things that appreciate, lease things that depreciate. Both can apply to a car but it depends on your subjective choice.

Seems strange to hear someone that is apparently 'financially' savvy saying that they are happy to buy a car with cash. That is a great way to turn a useful sum of money into dead money on a depreciating asset. Surely if the stock markets yields on average 8 - 13%, you'd be far better off investing it and finding a finance deal of less than 5%. That way your money is still net 3 - 8 %?

How many of us wished we'd seen this vid before we bought our first car. Or any car ?

I have to run a car for work as I'm a service engineer, so company gives me a set amount, after tax im left with 350 a month, so bought a 2 year old car on a 3% 4 year loan and after 2 years bought an extended warranty. Next year the 4 years are up. Not sure if i will do same with a shorter loan term as i will have a trade in, of get a newer car. I wont buy brand new, its amazing how they drop in first year !

I haven't even watched the video just had to like and comment thank you so much I'll watch it when I get home🙌🏿🙌🏿🙌🏿

This video is absolutely fantastic, it was exactly what I was looking for!! Thank you for your work, you have my like and subscribe. Please consider thinking about the keywords as unfortunately I struggled to make it to this piece of content, which was what I was looking for :)

Mamafur! Appreciate your advice... needed this video . Thank you

GREAT INSIGHT ON CHOOSING THE DEAL. THANKS FOR GREAT VIDEO

I think I just need reassurance. I’ve payed off my debt. Working 6 days a week to pay off my mortgage in 3 years. I’m single and paid off my car. 2010 Toyota aygo. Every penny going into the mortgage to pay it off. House worth 475K. Hopefully I don’t burn out. I will have no savings or investments by the time it’s paid as I don’t think I can focus on this. Know nothing about it. I’m single and turning 37 in July. Is this a bad idea?

I’d be really interested to know if you are planning on changing your investing strategy following the new budget. I know you currently invest in the LS100, will you be reducing your UK position and moving to something else like the Vanguard global fund instead?

We bought our brand new car year ( pcp ). After 3 years we paid cash for the remaining. Our car now is 6 y/o and next year we plan to buy a new car but this time we will look for a 1 or 2 y/o car so a bit cheaper. Don't know if that is a good idea. Thanks.

This was brilliant 👏 thank you for sharing.. ive definitely learned something. If I dont pay cash in full then next time I shall go with the lease option. Do you know the cheapest place to compare lease options? Never PCP again x

I have and always will own a car and never lease one as it goes into the traders pocket and only cash is always the way to go

I recently purchased an EV and took Energy saving trust interest free loan over 6 years. This is Scotland only offer😬 I think this deal is unbeatable unless you decide to drive your good old diesel and give asthma to your children and put the money in investment to pay for their doctor visits🤑 Joking aside, what do you think of electric cars

Excellent review. In the current Covid crisis I tried to buy the my leased car,at the end of the term, but it was impossible to do it. I thought it might be possible but it wasn't

Hey Jennifer, just following this video up as I watched it some time ago but just wanted to get your thoughts on something. I’m considering getting an electric car and am in the really early stages of this. In terms of electric cars though because it’s still a very new thing, the prices are very high and I just can’t seem to justify paying that much money outright for a car that will still depreciate in value yearly. Also if I had £20-30k spare I would invest it in property and not a car. In this case where there’s limited option in terms of buying a car outright under 10k - what advice would you give?

Great video. I am saving as much as I can this year for an upgrade at some point next year. I want to pay for the car in cash.

Excellent video, thank you.

Lease = Fleece. Cars depreciate in value so quickly and are never an investment. Save cash to purchase your next car (don’t make banks and car dealers any richer than they are!)

Great video 😀

sorry this sounds like a very silly question, but what do you mean by premium?

I didn't understand the column 'Savings via Investing', what does this mean? tia

Hi if I wanted to get a car for cash I would have to save £457 per month for five years and I would have to wait all that time Until I could get a car and the price of the car would have went up Bob/ scotland

So could I get a secured loan and say a 2-3k deposit to lower the monthly payments and reduce interest paid? Or is it better to get the full amount it a loan?

I guess leasing works best then if you want a relatively new ish car all the time then and you lease in perpetuity ? And use any other money for investments which over maybe 20 years may make more?

I like your videos but opportunity costs on stocks/savings interest lost should have been included on the cash purchase, even if countered with the peace of mind non-financial bits.

I watch this for the accent and the smile. 😁 Great ideas are just a side hussle for me.

This is brilliant. thank you. Is it possible to get this spreadsheet?

Going for a HP for my next car 👍🏻

I love the videos but I don't think the PCP example is a fair reflection as it's blended in with HP and PCP deals are widely available at 2.9% even. Overall PCP is a better proposition than HP as you're only paying interest on the depreciation and not the whole vehicle.

Hi. I've had 2PCP finances. First one at the end I upgraded the car. This one I will have for 4 years. We're currently 6 months in. At the moment my head is saying to pay the 6k balloon payment in 4 years time, as the car will still only be 5 years old and done less than 50k miles so still relatively new. Can I over pay a PCP finance? X

Who would want to own a car especially, when all the petrol and diesel are going out within the next ten year. Put that money on a deposit for a house and ride a scooter.

I don't mind the idea of getting a new car every two years.

what is net result row?

The UK is now full of the joneses. . Pulling up at traffic lights trying to impress people who they don't even know 💯

I don't agree a personal loan is cheaper. When I had the cash I bought a car with a personal loan. Got charge 3% invested the £10k and made on average a 10% return a year. If you count inflation taking a personal loan for £10k or buying in cash its worth taking a personal loan. Plus after you return the loan in full it helps your credit score a lot and you can get cheaper loans and for more money.

you will own nothing and you'll be happy