Is it better to lease or PCP an electric / alternative fuel car? This is a question we are getting asked by our customers, as new forms of energy are being brought to the automotive market. With Tesla announcing a zero-servicing approach, some are asking about long-term ownership. In contrast, other customers are concerned about the future of the electric proposition and the security of residual values. Firstly, a big thank you to our Hyundai dealership, Motorfair, for sending through pictures of the latest Hyundai Ioniq to us.
As a credit broker, not a lender or dealership, we do not psychically supply the vehicle to our personal or business customers. While we will sometimes carry out personal handovers at the CarLease premises, the vehicles are organised, PDI’d and delivered by a franchised dealership. To add comfort, we don’t work with any dealership; we ensure that we work alongside those who maintain the same standard that we do; honest, ethical and quality service. Things do go wrong and this can often take place at the delivery stage. Where things happen we need to ensure customers are managed properly and receive the appropriate solutions to remedy any issues which arise.
If the future is green should I, or my company, be buying an electric car or looking at a PCP (Personal Contract Purchase)? To Lease or Buy that is the question … the conundrum of a usership vs ownership is not a new one. For the last 10 years the growth of contract hire as the foremost way to procure a new vehicle has seen a shift in attitudes and behaviours. The issue with “the PCP” is that some customers have, allegedly, been offered a solution which will build equity in a vehicle or allow them to return one at any point. This was a mix of over-salesmanship coupled with a lack of understanding from the customers. And, to be frank, some customers are simply more interested in the cheapest monthly solution rather than the detail. A PCP contract operates quite similarly to a contract hire agreement in many ways; you choose a vehicle, a term (24-60 months), annual mileage (5,000 – 50,000 miles per annum) and an initial payment (with contract hire we call it an initial rental). When you put together the PCP solution you are provided with a guaranteed future value (GFV)/balloon, which is an amount of money you must pay to purchase the vehicle or, in the alternative, decide to hand the vehicle back to the finance company.
Undoubtedly, a PCP can be seen as more flexible than a contract hire solution as there is an ability to purchase or return. Contrary to popular belief, you cannot return the vehicle at any point. You must ask for an early termination, which involves you paying the finance company an amount of money to return the vehicle or, should this arise, an amount of money to purchase the vehicle. When you have paid over 50% of the total amount payable you may voluntary terminate the vehicle, a process which does not need you to pay anything further. When the vehicle is returned, it will be subject to an inspection and the mileage is reviewed. If you damage the vehicle excessively or go beyond the contracted mileage you will be charged for this. There is no such thing as an unlimited mileage PCP with a GFV; the contract is based on your needs and requirements. Customers believing their only obligation is the monthly rental have unfortunately been misinformed or have failed to understand the process.
Where a PCP offers a great solution is for those customers who genuinely do want the opportunity to buy/sell the vehicle. Please do not enter into a contract on the understanding the vehicle will make you money; cars generally depreciate and are not a form of investment! The interesting notion with electric vehicles, and other alterative fuel forms, is that their residuals are currently strong. With supply being limited and demand growing, the interest in a 2/3/4 year old vehicle is only increasing. A lot of this is down to company car tax changes from April 2020 (the “zero” BiK situation) plus emissions based charging coming into force via local authorities in cities throughout the UK. The consideration is about moving customers away from traditional combustion engines and into newer forms of technology. We have already seen the impact of “dieselgate” reducing interest in the diesel vehicles as a whole, so there is a clear ability to change attitudes to fuels.
While the entrepreneurs amongst us make want to pursue the purchase-style approach to benefit from potential profits, those risk-averse amongst us may feel a little different. Will electric vehicles work out? What happens if a new form of energy like Hydrogen, prove to be better? If you do go down the purchase route or PCP, it is likely you are not only going to pay more than a contact hire agreement, you are undertaking more risks. One of the reasons that contact hire is so popular is that the risk and reward sits with the finance company; so long as the customer operates within the allocated annual mileage and does not return the vehicle in a condition below the standards of the BVRLA’s fair wear and tear standards, there are no additional costs. Should the actual price of a vehicle fall short of that expected, it is down to the finance company to manage this issue and loss. Contract hire, with a funder-maintained option included, can offer fixed cost solutions. With the exception of insurance and fuel/electricity, you can pay an amount of money per month for a vehicle. There are no hidden costs, charges or balloon payments. At the end of the contract, you simply organise the vehicle to be collected from your home or business address. If you enjoy the vehicle/finance product, you can manufacture a situation where your new one arrives on the day your current model is collected – known as “key for key”. With battery and technology developments rapidly occurring, are you not more likely to change a car every 2-3 years anyway?
There is no right or wrong answer for everyone. In every situation consider if the fuel choice is right for you/the company based on the driving behaviours and your circumstances. Don’t presume the cheapest monthly solution if the best solution!
In terms of the car shown here, the Hyundai IONIQ HATCHBACK SPECIAL EDITIONS 1.6 GDi Hybrid 1st Edition 5dr DCT, this is based on the following configuration:
- Iron Grey Metallic Paint
- Cloth – Dark grey
- 17″ alloy wheels
As standard the car includes heated rear screen, solar glass with windscreen shade band, tinted windows, hill start assist control, traction control, Apple car play/android auto, Bluetooth, wireless phone charging pad, driver attention alert system, lane departure warning system with lane keep assist, lane follow assist, parking system with rear camera and guidance system, rear parking sensor, 10.25” touchscreen with satellite navigation, supervision with 7” high resolution FT, auto dimming rear view mirror, body coloured exterior features, electric foldable, adjustable and heated door mirrors, DAB radio, Infinity sound system, steering wheel controls, automatic headlights, door mirror puddle lights, high beam assist, LED headlights/indicators and running lights, positioning lights LED, climate control, cloth upholstery, heated steering wheel, interior mood lighting, autonomous emergency braking, 17” alloys, keyless entry with push button start, 60/40 split folding seats, interior mood lighting, heated steering wheel and immobiliser. Apart from colour choice, there are no additional options to add to the vehicle.
On the technical side, company car and business users can note the P11d at £24,781.00 and CO2 at 85g/km. The 1580CC 6 speed auto engine is coupled with a small lithium-ion battery which delivers 78.5 combined MPG (EC), 62.8 (WLTP), 141ps and 0-62 times of 10.8 seconds. The service intervals on a Ioniq are every 12 months or 10,000 miles whichever lands sooner. With yearly servicing, do consider a driver vs funder-maintained agreement.
For More Information; https://www.carlease.uk.com/deals/hyundai/ioniq