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Car leasing vs Personal Contract Purchase

We compare car lease options with PCP finance to help you make up your mind.
Car leasing vs Personal Contract Hire

Car leasing Vs PCP – What’s the best option?

Personal Contract Purchase (PCP) and car leasing are both popular ways to pay for a new vehicle. When you’re in the process of getting a new car, deciding which model to go for is often the easiest part. Picking between payment methods can seem much more daunting. Don’t stress - we’ve put together this helpful guide to give you a hand with making that decision.

What is car leasing?

Car leasing allows you to drive the newest cars for a preferred period, before handing them back completely stress free. You’ll pay a fixed, interest free, monthly payment calculated using your annual mileage, length of contract and initial payment. At the end of your contract, you hand back your lease car or enquire about purchasing it. It’s not guarantee that you’ll be able to buy the car at the end of your contract, but quite often this will be completely fine.

Pros and cons of car leasing.

What are the advantages of car leasing?

Leasing a car means that you get to skip out on the many stresses that come with buying a car or using a different payment method. You’ll have road tax included for the entire lease period, as well as an official manufacturer’s warranty and the option to add maintenance packages as part of your monthly bill.

You’ll never have to worry about the depreciation of your car or reselling when you’re finished using it. The car will go straight back, and you can get excited about picking a new one. 

Car leasing is a great way of enjoying a brand-new car for a period of time, before swapping it for something even newer. This is perfect for anyone who likes to be on top of car trends and update their vehicle regularly.

What are the disadvantages of car leasing?

At the end of a car leasing contract, you’re not guaranteed to be able to purchase the vehicle. This is always down to the lease provider, so if you know that you definitely want to purchase the car then you should consider this from the get-go. You’ll also need to organise your own insurance arrangements as, unlike road tax, this isn’t included in your monthly bill. Fees will apply if you go over your annual mileage limit, but you’ll be made aware of the rates before entering the contract.

What is Personal Contract Purchase (PCP)?

PCP is a type of finance agreement that allows you to pay an affordable deposit (or sometimes not deposit at all), followed by monthly payments for the contract length. At the end of the contract, you get the option of paying a final ‘balloon’ payment and take whole ownership of the car, or refinance to pay off the remaining balance. If you decide not to buy the car at the end of the contract, you also get the option to hand the car back or trade it in.

The reason PCP arrangements appear to be so attractive is because you are not actually paying off the value of the car, so they seem cheaper. PCP monthly payments cover the value that the vehicle is expected to depreciate by during the time you are using it. So, you’ll be paying the difference between the car’s initial price and the value it is predicted to have at the end of the contract.

Pros and cons of PCP

What are the advantages of PCP car finance?

With a PCP car finance contract, you’ll pay low monthly payments for the period that you’re using the car. This makes PCP attractive, as the payments are often lower than other methods. You also get a few choices at the end of your contract around what you’d like to do with the car next; you can pay the large fee to buy the car, trade it in or hand it back. It’s a good option if you like to swap your car regularly, allowing you to enjoy new cars without the worry of reselling.

What are the disadvantages of PCP car finance?

PCP car finance deals are usually subject to interest, so you’ll be paying extra on top of your normal payments. You’ll face fees for going over your mileage limit, and you’ll really need to keep the car in good condition. If you want to keep your PCP car at the end of your contract, you’ll need to pay a ‘balloon’ payment to cover the rest of the cost or refinance the car. This payment can be quite large, since PCP doesn’t actually cover the full price of the vehicle. Unlike car leasing, PCP contracts do not include road tax so this is an extra bill you will need to sort out yourself.

Is car leasing better than PCP car finance?

Car leasing is the better option for anyone who likes to swap their car regularly, and wants interest free, monthly payments that include road tax, too. With PCP finance, you do get more options at the end of your contract, but this can often be more stressful.

Of course, it’s entirely up to you which way you choose to get in the driver’s seat of your new car. We’re here to help you through the process and answer any questions that you might have, so get in touch if you need an extra hand.

You can also take a look through our leasing guides to learn more about the process.

If you want to discuss leasing and how it might benefit you, please don't hesitate by getting in contact, or completing a callback form:

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