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With over 2.5 million new vehicles registered every year in the UK its clear we like driving our shiny brand new cars away and for a number of years Personal Contract Purchase (PCP) has enabled drivers to have a new car every few years at low cost and with fixed payments.
So how do the options compare?
What is Personal Contract Purchase (PCP)?
A PCP deal is similar to a long term rental however you will need to pay a larger deposit and have options at the end of the contract as follows:
- Use the equity in the car towards a new car with the same dealer
- Return the car to the dealership
- Extend the contract to a total of 5 years
- Pay the baloon payment and keep the car.
The mechanics of a PCP contract:
- You do not own the vehicle at the start
- You will have a credit check
- Contracts generally last from 2 to 5 years
- You estimate your contract mileage at the start, exceeding this mileage reduces the estimated sales value of the vehicle
- You will need to pay a deposit
- You don't own the vehicle at the end of the contract and you have the 3 options outlined above
- Over 85% of PCP customer DO NOT buy the car at the end of the deal
What is Personal Contract Hire (PCH)?
A PCH is a Personal Car Leasing deal is even more similar to a long term rental and at the end of the contract you have the following options:
- Return the car to the dealership
- Extend the contract to a total of 5 years
The mechanics of a PCH contract:
- You do not own the vehicle at the start
- You will have a credit check
- Contracts generally last from 2 to 5 years
- You estimate your contract mileage at the start, exceeding this mileage reduces the estimated sales value of the vehicle
- You will need to an initial rental which is usually far smaller than a PCP deposit
- You don't own the vehicle at the end of the contract
- You are free to start a clean new lease on any vehicle with any new funder
Key Features of Each Product
| Key Features | Outright Purchase | Personal Contract Purchase (PCP) | Personal Contract Hire (PCH) |
| Ownership from the start | Yes | No | No |
| Option to own at the end | Yes | Yes | No |
| Low Deposit Options | No | No | Yes |
| Fixed Monthly Payments | No | Yes | Yes |
| Is there depreciation risk? | Yes | No | No |
| Mileage Caps | No - But higher mileage reduces cars value | Yes | Yes |
| Return Conditions Apply (Damage etc) | No - But damage reduces cars value | Yes | Yes |
| Final Balloon Payment | No | Yes | No |
| Early Termination Charge | No | Yes | Yes |
| Is Road Fund Licence included for the contract | No | No | Yes |
| Who is it best for? | Happy to take depreciation risk Wants to keep a car more than 5 years Happy to buy a used car | Wants fixed cost motoring Wants a new car Happy to pay a bigger deposit Might want to buy car at the end of the contract | Wants fixed cost motoring Wants a new car Wants to pay a lower initial rental Does not want to buy car at the end of the contract |
So for the drivers who would like a new car and don't want the depreciation risk then its a straight choice between PCH and PCP.
We compare Personal Contract Hire against a Personal Contract Purchase Deal Here
And another great Personal Car Leasing Comparison Here:
If you would like any further information about these or any other deals don't hesitate to call us on 0330 056 3331 to speak to one of our Customer Service Executives
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