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Car Leasing vs PCP (Personal Contract Purchase)

Red Peugeot driving on the road
Front shot of the red Peugeot car driving on the road

Did you know you can get a brand new car every few years with a leasing or finance deal? Leasing, or a personal contract hire (PCH), and personal contract purchase (PCP) can put you in the driving seat of a new model every 3 - 5 years without having to pay a lump-sum payment towards it. You can pay off the use of the vehicle over a fixed monthly instalment plan and never have to down the vehicle if you don't want to. Almost 80% of cars driving on UK roads are being driven under a PCP contract and a further 1.5 million cars in the UK are on lease for either business or personal use.

Personal Contract Hire (Leasing) and PCP Comparison

The main difference between PCH and PCP agreements lie at the end of the contract. A personal contract purchase gives you the option to either buy the vehicle, part exchange the vehicle and put the equity towards a new car,, enter a new contract, or simply end the contract. With a personal contract hire you won't have the option to ever buy the vehicle outright so you'll never be the owner. Your only option at the end of the deal is to return the vehicle to the leasing company and choose whether or not to enter a new contract. Read the below two tabs for a breakdown of personal contract hire and a personal contract purchase.

Vehicle options


  • Drive brand-new vehicles
  • Available from the majority of car manufacturers
  • Get the new model when your contract ends


Contracts


  • No option to purchase the lease vehicle
  • Mileage limits
  • Wear & Tear guidelines applicable
  • 12 - 60 month contract lengths
  • Leasing company will always own the vehicle
  • Personal Contract Hire available
  • Business Contract Hire available


Payments


  • Deposit required (a.k.a - initial rental fee)
  • Fixed monthly repayments
  • Extra charges may incur for exceeding mileage limits
  • Extra charges may incur for unacceptable 'wear and tear'
  • Exit fee for ending contract early
  • Businesses can claim back VAT on lease payments (BCH only)


Maintenance, insurance, taxation


  • Comprehensive insurance required by the lease holder to drive the vehicle
  • 'Insured leases' are available
  • Road tax required to be purchased by the lease holder
  • Optional maintenance packages available

Vehicle options


  • Drive brand-new vehicles
  • Available on used cars (max 5 years old)
  • Available from the majority of car manufacturers
  • Get the new model when your contract ends


Contracts


  • Option to purchase the vehicle
  • Option to part exchange the vehicle
  • Mileage limits
  • Wear & Tear guidelines applicable
  • 12 - 60 month contract lengths
  • Car dealership will own the vehicle until the contract holder chooses to purchase


Payments


  • Deposit/no-deposit contracts
  • Fixed monthly repayments
  • Extra charges may incur for exceeding mileage limits
  • Extra charges may incur for unacceptable 'wear and tear'
  • Exit fee for ending contract early
  • 'Balloon payment' required if you want to purchase the vehicle


Maintenance, insurance, taxation


  • Comprehensive insurance required to drive the vehicle
  • 'Insured contracts' are available
  • Road tax required to be purchased
  • Optional maintenance packages available


  • Personal Contract Hire

    Vehicle options


    • Drive brand-new vehicles
    • Available from the majority of car manufacturers
    • Get the new model when your contract ends


    Contracts


    • No option to purchase the lease vehicle
    • Mileage limits
    • Wear & Tear guidelines applicable
    • 12 - 60 month contract lengths
    • Leasing company will always own the vehicle
    • Personal Contract Hire available
    • Business Contract Hire available


    Payments


    • Deposit required (a.k.a - initial rental fee)
    • Fixed monthly repayments
    • Extra charges may incur for exceeding mileage limits
    • Extra charges may incur for unacceptable 'wear and tear'
    • Exit fee for ending contract early
    • Businesses can claim back VAT on lease payments (BCH only)


    Maintenance, insurance, taxation


    • Comprehensive insurance required by the lease holder to drive the vehicle
    • 'Insured leases' are available
    • Road tax required to be purchased by the lease holder
    • Optional maintenance packages available

  • Personal Contract Purchase

    Vehicle options


    • Drive brand-new vehicles
    • Available on used cars (max 5 years old)
    • Available from the majority of car manufacturers
    • Get the new model when your contract ends


    Contracts


    • Option to purchase the vehicle
    • Option to part exchange the vehicle
    • Mileage limits
    • Wear & Tear guidelines applicable
    • 12 - 60 month contract lengths
    • Car dealership will own the vehicle until the contract holder chooses to purchase


    Payments


    • Deposit/no-deposit contracts
    • Fixed monthly repayments
    • Extra charges may incur for exceeding mileage limits
    • Extra charges may incur for unacceptable 'wear and tear'
    • Exit fee for ending contract early
    • 'Balloon payment' required if you want to purchase the vehicle


    Maintenance, insurance, taxation


    • Comprehensive insurance required to drive the vehicle
    • 'Insured contracts' are available
    • Road tax required to be purchased
    • Optional maintenance packages available


Car Leasing and PCP Pros & Cons

Car leasing pros and cons
Car leasing pros and cons
Personal contract hire (pcp) pros and cons
Personal contract hire (pcp) pros and cons
Copper Renault parked outside

Is PCP finance or a lease better for a new car?

If you want to own a new car then leasing isn't really an option for you. A PCP contract may be the best route to go down if you want to finance the vehicle with an instalment plan and avoid a lump payment. It offers relatively low monthly payments compared to buying a car outright or taking out a bank loan, plus it has the added flexibility at the end of the contract. If you are considering buying a car, read our guide about when to buy or lease a car.

Leasing a new car is typically the only option for contract hire as they're tailored for those who want to drive new models and change their car regularly. If you don't wan to own the car then leasing is ideal, but if you change your mind you would not be able to purchase it. You’d also never own the car, which is fine if you would prefer to get a new car at the end of the deal, but you’ll not build any equity that could contribute to the payment of a new car or contract hire.


Stoneacre Peugeot dealership building

Is PCP finance or a lease better for a used car?

Lease deals don't tend to be available on used cars. If you want to own a car and you are choosing to buy a used vehicle because its cheaper, then a PCP contract is a great option for you. Buying a used car through PCP finance can help spread the cost of the vehicle across several months and you'll eventually own the vehicle after you've paid the final payment.

You'll have all the options for maintenance packages and insured contracts which are typical of finance plans, plus you'll always have the added flexibility at the end of the contract for peace of mind. Note that personal contract purchases are reserved for cars which are at the most 5 years old.


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