Which form of personal vehicle funding is right for you?
PCP – vs. – PCH
In an era where more and more people are turning to leasing in an effort to fix their cost of motoring, more and more are funding their vehicle via some sort of personal lease.
Personal leasing and contract hire packages are packed up in many different ways by retailers, so it is important that you understand the difference between the two before you enter into one.
One is much more flexible than the other and it offers more consumer protection and the potential prospect of equity: this is PCP, or Personal Contract Purchase.
The other one may sometimes be cheaper than PCP and it is a fixed term contract – the car is “rented” for a term and then it goes back to the funder at the end with no option to buy. This is a PCH, or Personal Contract Hire.
As PCP is more flexible than PCH, it can really be a “win-win” funding option for your next vehicle. However, it can often be difficult to track down a leasing provider who offers this option and Personal Contract Hire is far more widespread.
Here are some of the pros and cons of both PCP and PCH for you to consider before we take an overall view.
PCP Pros and Cons
Personal Contract Purchase Pros:
- You can potentially benefit from the equity in the vehicle if you choose to keep it and sell it at the end of the contract (or even part exchange or re-finance it) – the choice is yours
- There is a fixed monthly cosy like personal contract hire but you have the option to hand it back or pay a final value figure if you wish to
- Like PCH, you can still take on a great value maintenance package if you want to really fix your motoring costs for the term
- If you choose to take out a PCP agreement, you will be benefitting from the terms that your provider has negotiated with the manufacturer, dealer and/or funder. Obviously, with bulk buying power, this is very likely to be a bigger discount than a single car buyer would be able to obtain
PCH Pros and Cons
Personal Contract Hire Pros:
- PCH also gives you a fixed monthly cost for the term agreed
- You can opt to include a maintenance package as part of your Personal Contract Hire agreement
- You will usually be able to get a competitive monthly payment as your supplier will have secured favourable terms with the vehicle supplier on your behalf
Personal Contract Hire Cons
- If your vehicle is returned over mileage or if it is in poor condition, you will be liable for charges from the funder
- Unlike PCP, if this is the case, there will is no option to buy the vehicle at a favourable pre-negotiated end value figure to try and negate some of these costs
PCP – vs. – PCH?
As you may have noticed, there weren’t actually any cons listed in the PCP section – the only difficulty that you may experience is finding a good deal from a reputable provider.
If you take out a Personal Contract Purchase agreement, it really does offer the best of both worlds.
This is because PCP allows you to walk away or benefit from any equity that you have in the vehicle at the end of the contract: PCH doesn’t.
You will still have the fixed monthly costs like you would if you took out a personal contract hire agreement and you can still take out a great value maintenance contract.
I have featured this topic before and I did say back then that Personal Contract Purchase specialists are difficult to find if you are surfing the internet for deals.
Our friends at Compass Contract Hire are specialists in the field of PCP and are happy to help with whatever query you may have and of course, provide you with a free of charge written quotation on the vehicle of your choice; you can contact them by clicking here or calling 02392 228070.