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Leasing a Car vs. a PCP: The Key Differences

So, you need a car. Maybe it’s to go to work, maybe it’s to do your job or just to get the kids to school on time in the morning. Whatever the reason, you just know that a car is what you need. Perfect, just head over to a garage and… Wait. PCP or lease? What is the difference?

The answer, unfortunately, is quite a lot. Everything from the way your payments are structured to what happens to your car at the end of your lease is different under a PCP than it is under a lease.

What happens at the end of the contract?

We have PCPs

A PCP (Personal Contract Purchase) is effectively a form of installment purchase. What do we mean by that? Well, ownership of the vehicle remains with the finance company until all payments have been made. You are still the registered owner, but the vehicle is owned by the finance company.

With all your payments made, you have a few options:

  • Do you want another car? Simply return it to the finance company, at no additional charge.

  • Do you want to keep the car? You can settle your agreement by paying the remaining value of the car, as stated in your agreement.

  • Do you want a different car? Parts exchange. Depending on the value of the car, it could cover the deposit of another car.

in a lease

Leasing is simply renting a car for a set period of time. So in the end, your only option is to return the car. Fortunately, leasing companies will often come and pick up your car at a pre-arranged date, and even drop you a new one if you’d like.

Do you pay a deposit?

We have PCPs

Yes. Often, you can pay as much or as little as you want, which affects the amount you’ll pay each month.

in a lease

No. However, you will need to make a “down payment.” This is usually an advance payment of 1, 3, 6 or 9 months. After that, you’ll pay a monthly amount, and just like a PCP, the higher the initial payment you choose, the lower the monthly payments.

Can you change your mind?

We have PCPs

PCP agreements are more flexible than their leasing counterparts and often allow you to:

  • Trade your car if, for example, you need more seats for an upcoming addition to the family.

  • Need to increase the number of miles per year

Depending on your contract and situation, these changes may incur a fee or may be free. When researching a PCP, always be sure to carefully read the terms of their contract. However, keep in mind that if you want to cancel your PCP, you will usually have to pay your contract in full.

in a lease

Leases offer much less flexibility if you want to make a change, such as swapping vehicles. Usually, your only option is to cancel your agreement and pay the remaining payments. However, some leasing companies only charge a cancellation fee.

Is there any additional cost?

We have PCPs

Insurance is still required at a PCP, so keep that in mind. You will also need to consider the fact that VAT is added to the PCP prices quoted. Also, most PCP providers will offer maintenance packages, an additional monthly fee that will take care of any mechanical issues that may arise.

in a lease

Leases tend to be cheaper than PCP deals, largely because the finance company can reclaim VAT on your vehicles. As such, there is also no VAT paid on your end. However, you will still need to insure your car, and just like a PCP, there will be an optional maintenance package if you want it.

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