Leasing a new vehicle

Leasing is the new buying.These days we seem to have adopted a pay-as-you-go approach to life with the likes of mobile phones, gym memberships, insurance and TV licences all paid for via monthly direct debits that simply leave our bank accounts automatically. And that thought process is now being applied to cars in a very big way. If you visit any manufacturer’s website or showroom you will see lots of inviting deals concerning PCPs and PCHs so let's examine the principle a little closer.

PCP - Personal Contract Purchase
PCP is ideal for anyone who likes to have a new car on their driveway every three years. There is an initial deposit to pay depending on the car and this is followed by fixed monthly payments until the contract is up. Then the customer can select from a series of options. They can return the car and walk away. They can trade in the car against a new PCP deal or they can pay a final balloon payment that will make the car officially their property. The monthly instalments are based on an estimate of how much the vehicle will be worth at the end of the contract. Factors such as mileage and depreciation are taken into consideration when working out these figures.

PCH - Personal Contract Hire
PCH which is short for Personal Contract Hire or can also be called Personal Leasing. This is similar to a long-term rental agreement and although you will never actually own the car as you hand it back at the end of the term, the monthly payments tend to be lower than PCP schemes. Similarly to a house rental you will be expected to pay a deposit which generally equates to the cost of between three and six monthly payments and PCH schemes often come with a maintenance package in the cost which takes care of routine servicing and road tax, so it’s worth checking just what is included. Another advantage of PCH is there will be no worries regarding depreciation at the end of the deal as those issues are the leasing company’s concern not yours.

Leasing was previously seen as an area that was reserved exclusively for business drivers and the fleet market, but that has certainly changed over recent years and with intense competition between the manufacturers there are some fantastic deals to be had.

Here are some pros and cons for each scheme.
Personal Contract Purchase
PCP pros PCP cons
You can drive away a new car every three years Final balloon payment may be high
It can be used as equity towards a new car You will need to think carefully when estimating mileage to avoid expensive penalties
If you don’t want to buy the car at the end of the term, you can walk away
Personal Contract Hire
PCH pros PCH cons
Hassle-free motoring in a new car without depreciation concerns or worries about selling the car on There is no option to buy the car at the end of the plan
Monthly payments are lower than if buying on HP Double check your insurance premium before agreeing as it could be higher than anticipated
It offers access to many cars that would otherwise be financially out of reach It offers access to many cars that would otherwise be financially out of reach