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There are a few different routes to driving a brand new car without buying outright. And on the face of it a Personal Contract Purchase or ‘PCP’ agreement and a Personal Contract Hire, aka a ‘lease’ or ‘PCH’, are pretty similar. But there are some important and subtle differences - and this guide attempts to highlight the pros and cons of each.
A lease - or PCH as it’s known in the trade - essentially works like a long-term rental agreement. You choose the length of the agreement, make an ‘initial payment’ to bring the monthly leasing costs down, and simply hand back the keys once the leasing period ends. With a PCP deal you still have fixed monthly payments, but you also have the option to either purchase the car outright at the end of the agreement, or to use the vehicle as part exchange for a new one.
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A ‘Personal Contract Hire’ is another way of describing a lease agreement, and it’s something that comes with some real benefits for motorists, not least the ability to swap cars on a regular, frequent basis and also in selecting a lease vehicle that meets your precise needs at that point in time.
Key Benefits:
If you’re looking for an agreement that gives you the option to purchase and own the vehicle outright at the end of the contract, a ‘PCH’ lease might not be the right option for you. You might also be someone who doesn’t want to change their car every two or three years, in which case a traditional personal loan might be more appropriate, as opposed to a PCH or PCP agreement.
Considerations:
If you know, right from the outset, that you’ve got your eye on a vehicle you’d ultimately like to purchase and own for a considerable length of time, a PCP agreement might work well for you. With a PCP agreement you’re effectively paying off the depreciation value of the vehicle while it’s in your care, with an optional ‘balloon’ payment required at the end for you to own it outright.
Key benefits:
You might not have any intention of purchasing a vehicle at the end of the agreement and you might enjoy swapping cars with ease every two or three years. In which case, a lease is going to be a more sensible option for you than a PCP deal.
Considerations:
Every year, more and more people are choosing to lease rather than buy their new vehicle. In the UK today, personal car leasing now accounts for 1.9 million vehicles. Find out why in our guide explaining personal car leasing.
There are many benefits to personal car leasing, including cost effectiveness, smart use of your money, peace of mind and the hassle-free enjoyment of driving a brand-new vehicle. Find out more in this dedicated guide.
Read our simple six step process to car leasing in this short guide. Our leasing consultants will be on hand throughout the process to also offer their expert advice and guidance. Find out more here!
