So, you need a car. Maybe it’s to go to work, maybe it’s to get your work done 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 to a garage and… Wait. PCP or lease? What is the difference?
The answer, sadly, is quite a lot. Everything from how your payments are structured to what happens to your car at the end of your lease is different under a PCP than 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 remain the registered owner, but the vehicle is owned by the finance company.
With all your payments made, you have a few options:
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Do you want another car? Simply return it to the finance company, with no additional charges.
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Do you want to keep the car? You can pay off your agreement by paying the remaining value of the car, as stated in your agreement.
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Do you want a different car? Exchange of parts. Depending on the value of the car, it could cover another car’s deposit.
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 on a pre-arranged date, and even drop off a new one for you, if you so choose.
Do you pay a deposit?
We have PCPs
Yes. Often, you can pay as much or as little as you like, which affects how much you’ll pay from month to 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 lump sum, and just like a PCP, the higher the initial payment you choose, the lower your monthly payments.
Can you change your mind?
We have PCPs
PCP agreements are more flexible than their leasing counterparts, often allowing you to:
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Change your car if, for example, you need more seats for an upcoming addition to the family.
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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 read the terms of their contract carefully. Keep in mind, however, 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 fee to cancel.
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 quoted PCP prices. Additionally, 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, no VAT is payable on your part either. However, you will still need to insure your car, and just like a PCP, there will be an optional maintenance package if you want one.
