PCP vs Personal Contract Hire PCH

Summary - PCP vs PCH

PCP and PCH are quite similar in many ways however they have a few stark differences to look out for. One of the most significant differences is that of potential vehicle ownership. Please note that these are by no means the only vehicle finance options available on the market but are the most common here in the UK for personal leasing.

• PCH or "Personal Contract" Hire, commonly known as leasing is a long-term rental agreement with attractive monthly payments but at no time during the contract do you own the vehicle.
• PCP or "Personal Contract Purchase" is a long-term rental agreement with an option to purchase the vehicle with a balloon payment at the end of the term or part-exchange for a new vehicle.

Pros and Cons of Leasing (PCH)

A benefit of leasing a car or PCH is that of initial affordability. With a lease, a deposit is not required and a contract can be started with a small initial payment sometimes under £200. You also can choose your annual millage commonly between 5000 and 35,000 miles. This means that you only pay for the miles you intend to drive. Another tick in the leasing column is that there is no risk of falling into negative equity if the vehicle value declines rapidly during the term. With PCH costs or monthly rentals are totally fixed at the beginning of the contract with no interest to pay over the term. This makes it extremely easy to budget.

One negative with PCH and leasing is that you will not own an asset at the term-end and typically can't choose to purchase the vehicle. It must be noted however that some leasing funders may be willing to allow you to extend the lease beyond the agreed term if you would like to keep the vehicle for longer.

Pros and Cons of (PCP)

PCP or Personal Contract Purchase offers you the option to purchase the vehicle at the end of the term with a so-called "balloon payment". Beware however, you will be required to pay interest on the entire vehicle's value whether you decide to purchase it or not. 

Although not guaranteed, many PCP contracts come with maintenance included but please check the contract to see what is covered and what is not.

If you decide that you do not want to keep the vehicle at the end of the contract some companies will allow you to part-exchange the vehicle with the same or different dealer to find the best deal and car for you.

Other Considerations

If you have any concerns or questions related to either PCP or PCH then please call our expert team on 01494 424242.

• Full Road Tax is included within a Lease (PCH)
• You can add a maintenance contract to most Lease Deals
• No Interest is applicable with a Lease or Personal Contract Hire
• PCH is a simple process at the end of a Lease with most cars collected
• Fair Wear & Tear Guidelines must be adhered to for both PCH and PCP
• You must have fully comprehensive insurance for both PCP and PCH
• PCP is generally cheaper than a typical personal loan agreement
• Consider a Car Lease Salary Sacrifice