Leasing VS PCP - How should I finance my next vehicle?
Both Personal Contract Hire, also known as leasing, and Personal Contract Hire, also know as PCP, are both ways to obtain and pay monthly for a brand new vehicle (and sometimes used in the case of PCP). Both contract types allow an attractive fixed monthly cost but there are a few main differences between the 2 contract types.
Throughout this page we will help guide you to making an informed decision as to whether you lease or PCP your next vehicle. Please note that this information should not be relied upon as financial advise.
What is Leasing (PCH) and how does it work?
Leasing is a contract in which you pay for the use over a fixed term via an initial payment followed by a fixed monthly payment. Once your fixed monthly payments have finished, you simply hand the vehicle back to the leasing funder. There is no large final payment or balloon and you do not own the vehicle at the end nor is there any option to. View the benefits of leasing here.
What is PCP (Personal Contract Purchase) and how does it work?
A Personal Contract Purchase is a contract in which you pay a deposit followed by fixed monthly payments and then a balloon payment if you choose to own the vehicle. You have the option to either buy the vehicle at the end, hand it back or trade the vehicle in and use the equity towards your deposit for your next PCP contract.
In a PCP contract you borrow the full value of the vehicle and pay interest over the term.
What are the key differences between leasing and PCP?
Some key differences:
- Leasing only applies to new vehicles, PCP can be on new, nearly new and used vehicles.
- With leasing you don't have the option to buy the vehicle at the end of the contract as you are essentially long-term renting the vehicle, you simply hand it back to the finance company and take a new lease on another brand new vehicle. With PCP you have the option to either buy the vehicle, trade in the vehicle and use the equity towards the deposit of a new vehicle or walk away from the vehicle and contract type entirely.
- There is no interest paid on a lease, as you simply pay to use the vehicle and are not buying it.
- At the end of your PCP agreement there is still a significant amount of money outstanding by way of the balloon payment. At the end of your lease, you hand the car back to the leasing company and move on to your next new leasing vehicle.
- Typically with a lease you need to have a "good" or higher credit score but with a PCP a "poor" credit score will be considered. If this is a factor in your decision, get in touch with our team and we will try our best to assist.
- There are a few differences between PCH and PCP but the main difference is at the end of the contract, in a PCH leasing agreement there is no option to own the vehicle at the end you must simply hand the vehicle back and order your next brand new vehicle. However, with PCP you have a few of options, you can either just hand the vehicle back, pay the balloon payment on the vehicle to then own it or trade the vehicle in for something new.
Can I end my Lease or PCP early?
Yes, with both contract types you have the option to terminate the contract early. With a Lease you typically must pay 50% of the remaining monthly payments or with a PCP typically if you have paid 50% of the finance off you can hand the vehicle back and walk away from the agreement. But, always remember that the the total finance amount includes the balloon payment and any admin fees so always ensure that you at 50% before termination.
So, which is best for you? Leasing or PCP?
There are a couple of defining factors in making this decision that unfortunately I can't decide for you sat at my computer screen, however the questions below should help narrow this down for you.
Do you want to own the vehicle at the end of the contract?
If so then PCP is the only option out of the two that allows this.
Do you want a new vehicle for as little possibly monthly?
Leasing is the best solution for this as there is no interest paid and with some fantastic leasing deals around at the moment this should be cheaper monthly than a PCP.
If you are still undecided on which contract type to go for and are after some more information, learn about more of the benefits of leasing.
If you'd like to get straight to looking check out some of our great leasing special offers or alternatively take a look at our in stock offers.