PCP v Lease

PCP v Lease

PCP v Lease - What are the key differences?

PCP v Lease

PCP v Lease

Often when customers are looking towards leasing for the first time, they’re confused and don’t really understand what the difference is between a PCP agreement and personal car leasing, here we explain it, highlighting the key points between a PCP v Lease.

Leasehold cars are becoming more and more popular as retail customers become more aware of how this financial product works.


Contract hire is designed to drive the vehicle for a fixed period of between 2 to 5 years and then hand the car back at the end of the agreement.  The benefits of leasing are: -

  1. Low on No initial rental
  2. One fixed monthly payment, often much lower than a PCP payment
  3. Road tax included
  4. Brand new car every 2 to 5 years
  5. No worries about the resale

Important information to be aware of:-

  1. The funder is the registered owner of the vehicle
  2. You may not be able to purchase it at the end of the lease
  3. It is not a flexible product, so early termination charges would apply if you ended the lease early
  4. An excess mileage charge is applicable should you exceed the contracted mileage
  5. You may be charged for excessive wear or damage

A PCP agreement, Personal contract purchase, is another funding solution.  You pay a deposit amount, there’s a balloon payment at the end of the agreement, which comes with three options.  The amount you pay over the agreement is the bridged amount in between the purchase fee and the balloon amount.   PCP is more flexible than a personal car leasing agreement.

The advantages of a PCP are as follows: -

  1. Should your circumstances change, you can trade the vehicle in part way through the agreement
  2. You have the option to purchase the vehicle at the end of the agreement at a predetermined figure
  3. Should there be equity in the vehicle at the end of the agreement you’ll have the opportunity to trade the vehicle is.
  4. Should the GFV (Guaranteed future value) be more than the car is worth, you have the option to hand the vehicle back to the finance company.

Things you need to be aware of: -

  1. If you hand the vehicle back to the funder, excess mileage charges could apply
  2. If you hand the vehicle back to the funder you may be liable for damage charges
  3. You don’t own the vehicle unless you pay the balloon payment at the end
  4. Road fund licence is not included throughout the contract
  5. If you do need to settle the finance early, there may be negative equity, meaning that termination fees would apply
  6. There's usually a purchase fee and initial acceptance fee
  7. Interest will be applied to the payments

Personal Car Leasing

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