What finance option?

[maddogsetc]

Question for the UK buyers mainly here as I'm not sure what finance options are being offered in other markets.

I was planning on taking the 0% HP option as I hate paying interest, but read an article yesterday about EV's having poor residuals. This got me thinking - as the PHEV is mostly going to appeal as a business purchase, what will the residuals be like, say 1 and 3 years down the line?

Seems to me it could go one of two ways - either it will be highly sought after as a used car if the expected fuel savings and practicality stand up in the real world in which case supply and demand suggests in the early stages at least residuals will be good. But on the downside it might be sometime before values fall low enough to attract private buyers in and with concerns about battery life, resistance to change etc. I am worrying that the 3 year residuals might not be good.

So, I'm now wondering if the c. £4.5k interest charge to take a PCP might actually be money well spent to ensure a guaranteed minimum future value.

That said, if it proves as good as expected I might buy it from the business at the end of the 3 years and keep it long term instead.

Any thoughts?

 

[Hypermiler]

Hi.

It is a very tricky one.
Presume you mean the 50% deposit then pay balance over 12 months interest-free, which is what we are doing, but then we are a private buyer, no business involved so the deals may be different.

In my view, if you buy a new car you have to aim to keep it a long time - people who buy a new car every 3 years must suffer enormous depreciation. We are aiming to keep this car a long time and I suspect that residuals will be poor due to concerns on battery wear, no lack of supply (?) and the fact that several new ev cars are expected over the next couple of years which may be cheaper, have better tech or be more fancied by buyers.

Also, ev buyers in uk at the moment tend to be fairly well-off and probably want a new/er car rather than a 3 or 5 year old one. Wild generalisation, but people looking for older cars tend to be much more price-sensitive, and less-sophisticated about looking at whole-life cost and will compare upfront cost with say a diesel and not be willing to pay extra for a phev. I may be completely wrong about this of course, just my gut feeling at the moment. Of course it may turn out that we all keep them for 10 years and they are like hen's teeth!

Clearly it is a gamble and it boils down to how much of a gambler you are and whether the extra £4.5k is worth that peace of mind. the leasing company will have taken into account poor expected residuals so presumably you are locking into their figure and then wouldn't benefit if they turned out better than expected.

Given you are picking the car up soon, is it still possible to change to pcp?

Cheers

 

[maddogsetc]

Signing the documents on Monday so got today and tomorrow to decide!

Think you may be right about the medium term depreciation, but I suppose the 0% deal gives the option to trade at 12 months and as you say, with more manufacturers bringing out new models probably with better technology I'm thinking that 3 years might be the least optimal time to trade. On the other hand ground-breaking models can sometimes command disproportionately high residuals for nearly new if supply can't keep up with demand, which might just happen, as long as Mitsubishi don't flood the European market with all the units they had planned to sell in the US (perhaps more likely to affect LHD markets than UK?).

As a business user there is an emotional barrier to paying the same BIK tax for a 3-year + old car, not under warranty etc, as you'd pay for a shiny new one.

Ironically, as the whole cost will be written down in Y1, there is some disincentive around good residuals as HMRC will want to claw back some of the corporation tax you already 'saved'.

 

[Cityblueboy]

CAP have forecast that residuals with be 49% of list after 3 years and average mileage. I stress this is just a prediction but they are usually pretty accurate.
I am buying mine privately and taking 3 yr PCP because I can't afford the 50% in a years time. My payments are being covered by my fuel and road tax saving.

 

[Hypermiler]

Yes, agree that short term there may be good residuals if demand greater than ships can deliver - good point re US models but may impact uk if they've not started manufacturing yet. They'll need to do something with the factory capacity, unless they shut down production again!

You have the interesting interplay of business and personal considerations. Presume if the business buys the car outright you can then purchase it as a connected person at a fair price i.e. Parkers/glasses and the lower the better - less capital allowance clawback for the company (as you said) and low cost to you but i suppose it all comes out in the wash. Back in the day i was a corporation tax adviser, "expensive" cars were £12k and over and were separate pools but i suppose that has changed now?! I am 5+ years out of date. The Fya for ev has been around a while but I don't think I ever found any at work at that time.

At least it is a low bik rate, but i see what you mean about begrudging it for an older car.

Good luck with your last minute decision!
Cheers

 

[rjs104]

Hi All,

Good to hear discussion of the finance options - this is a conversation I want to have with my dealer when I go for a test drive tomorrow.

I saw a website that suggested the BIK %'s were rising steadily over the next few financial years, and so into 3 years of ownership - heading towards the 9-13% for this vehicle, which makes it less attractive.

I too am considering the option of buying in my company now to get the benefits there, but after about 3 years buying it personally back from my company.... Though I have to admit that I don't know all the implications of doing that - I've contacted my accountant for some advice.

The discussion about new tech coming out is interesting. It's rather like buying a computer isn't it - there will always be something better around the corner, and we're probably currently in the phase where that corner is very tight in so much as there will probably be a lot of new technology releases over the coming 5 years in this area...

I'm a terrible one for wanting the latest "toys" - but sometimes this does bite me on the proverbial!

Richard.

 

[MorganV]

Hi, I just ordered one of these for myself - and I am also a finance lease specialist. I also run my own limited company. I took one on contract hire through the business over three years. That way the vehicle costs me the monthlies and I don't have to worry about residuals at the end. I just hand the vehicle and the keys back and move on to the next thing. I also got a better deal running the finance myself than taking it through Mitsubishi finance. The dealer was fine about me financing it myself as long as I ordered it from them. MV

 

[MorganV]

Depending on the funder and the financial product that you use, the final payment due on the vehicle after 3 years is around £11,700 - £12,500 - £14,000. The underwriters decide these figures and are deemed to be the 'trade' value of the vehicle at the end of three years. This is using the PHEV GX3h at 10,000 miles per year as an example.

 

[pupenhausen]

I was thinking about a PCP on a gx4h but when I got to the dealership they wanted a £10k deposit and over £400pm for 4 years on 9k miles per year, the GFV on it was £12,500. I can't see much equity in this considering the EV components will only be warranteed for an extra year after this. I could see the dealer selling for about £15k so they would buy back for £13,500 max. So £1000 deposit on the next car isn't very tempting if this is how the residuals end up. We are going private contract hire, 9k miles, £1900 initial payment, £336pm this also includes gap insurance. So far less on deposit, far less on monthly payment and no worries of possible negative equity, it was a no brainer for me.

 

[dukeinlondon]

I was thinking about a PCP on a gx4h but when I got to the dealership they wanted a £10k deposit and over £400pm for 4 years on 9k miles per year, the GFV on it was £12,500. I can't see much equity in this considering the EV components will only be warranteed for an extra year after this. I could see the dealer selling for about £15k so they would buy back for £13,500 max. So £1000 deposit on the next car isn't very tempting if this is how the residuals end up. We are going private contract hire, 9k miles, £1900 initial payment, £336pm this also includes gap insurance. So far less on deposit, far less on monthly payment and no worries of possible negative equity, it was a no brainer for me.

I have had exactly the same PCP quote and am going for pretty much the same deal. If I am so endeared with the car at the end of the lease, I don't think it'll be difficult to find a 3 year old one coming off another lease to buy outright or a nearly new/ex demo on a PCP.

 

[pupenhausen]

I was thinking about a PCP on a gx4h but when I got to the dealership they wanted a £10k deposit and over £400pm for 4 years on 9k miles per year, the GFV on it was £12,500. I can't see much equity in this considering the EV components will only be warranteed for an extra year after this. I could see the dealer selling for about £15k so they would buy back for £13,500 max. So £1000 deposit on the next car isn't very tempting if this is how the residuals end up. We are going private contract hire, 9k miles, £1900 initial payment, £336pm this also includes gap insurance. So far less on deposit, far less on monthly payment and no worries of possible negative equity, it was a no brainer for me.

I have had exactly the same PCP quote and am going for pretty much the same deal. If I am so endeared with the car at the end of the lease, I don't think it'll be difficult to find a 3 year old one coming off another lease to buy outright or a nearly new/ex demo on a PCP.

I went for the 4 year lease as there is a very good chance that the new model or at least a facelift model with more efficient technology will be out at the end of it. I will only ever go for new cars from now on, can't be doing with mot's and problems not under warranty. In the end it costs more. If you buy it as a long term investment, at some point you will need to replace the battery which will cost a fortune. And if you want to sell it after 3 years you will have a lot of people wary of buying a car with ev components that only have an extra 2 years warranty on them. It could go the other way and the government decide to stop the 5k grant and the used value goes higher, but I can't see it. No doubt EV driving will become as expensive to run as fossil fuel cars when they become as popular, the government will issue some tax or other to hit ev drivers hard to compensate for the loss of oil profit.They have already stopped the free public rapid charge points and the free home charge points will stop in August/September. Glad i'm diving on the bandwagon before it all goes pear shaped!

 

[markuk]

Hi guys, those of you that got the £336/mo deal for the GX4h on PCP - where did you get that deal from?

Thanks

 

[pupenhausen]

Hi guys, those of you that got the £336/mo deal for the GX4h on PCP - where did you get that deal from?

Thanks

It's not on PCP, it's on PCH. PCP was over £380pm with a £10k deposit.