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Home > Blog > PCP vs. Car Leasing: Key Differences

PCP vs. Car Leasing: Key Differences

Published: 5th November 2020
PCP vs. Car Leasing: Key Differences

When you’re on the market for a new car it can often feel like you’re wading through the leafy jungles of the Amazon just to find car finance that suits you. Do you pick car leasing, PCP, a personal car loan, or hire purchase?

Finding the right car for the right price shouldn’t be that difficult. And in actual fact, it isn’t. While there are several different types of car finance options available, today we’re breaking down the key differences between PCP and car leasing.

If you’re interested to see who would win in a brawl, our guide on PCP vs. car leasing is sure to answer that question and much more.

What’s The Difference Between PCP and Car Leasing?

PCP vs. car leasing. From an initial glance they can seem pretty similar, I mean they’re both car finance options, right? Well yes technically, but that’s about where their resemblances end.

If you’ve managed to narrow your car finance options down to car leasing and PCP, hooray! But, we can’t celebrate yet. Now you have to pit them against each other, key differences, benefits, essentially you have to play a game of Top Trumps with PCP and car leasing. 

This will help you to work out which finance option is right for you.

PCP Explained

What is PCP?

PCP (or personal contract purchase), resembles, for the most part, a car loan with one key difference. Unlike a car loan, you won’t be looking to pay off the car, in fact, you won’t even own the car. 

Essentially with PCP, you’re looking to pay off roughly half of the cost of the car, this is simply to ‘rent’ the car during your contract. 

The reason you’re not paying off the full value of the car is that you’re given the choice to buy out the vehicle outright at the end. This is called the ‘balloon payment’ and is the excess that will need to be paid if you’d like to own the car. 

Like most car finance options, PCP looks for a deposit (roughly 10%). If you’re looking to give the car back you’d look at paying the minimum amount, whereas, if you’d like to pay the balloon payment and keep the car, you’d probably want to chuck a bit more at the deposit.

Options at the End of the Contract

At the end of your contract with PCP, you’re faced with a very important decision. Do you want to own the car or do you want to walk away? 

You can simply hand the car back to the finance company (subject to mileage and condition, of course), or you can actually use the car as a part exchange for a new contract. These are the options if you’re avoiding paying the balloon payment.

Whereas, if you’re looking to pay the balloon payment the car is yours. You are not only the registered keeper but you also own the car outright. You have paid for the car, it’s yours, fair and square.   

Tax, Insurance and Maintenance

With PCP, you’d most likely be looking at sorting your own tax and insurance out for the vehicle. This is easy enough to do online. Similarly to the tax and insurance, the maintenance of the car is also your responsibility.

If you fail to keep up with the maintenance of your vehicle this may result in imposed chargers when you hand back the car (if you choose to do so). 

Pros of PCP?

  • Fixed monthly payments to help with budgeting
  • The option to refinance the final optional payment
  • You don’t have to worry about depreciation (unless you’re looking to buy)
  • The option to put down a larger deposit to lower monthly payments and the final balloon payment
  • Helps boost your credit score through monthly direct debit payments
  • Provides an affordable option to drive a car outside of your price range

Cons of PCP?

  • You won’t own the car at the end of the contract unless you decide to make the final balloon payment
  • You will have to pay for any damage to the car that is outside of the normal wear and tear
  • If you fail to maintain the car with services and MOTs you can have additional charges imposed upon you
  • There is usually a mileage limit, so any additional miles will be charged for
  • Interest rates for PCP are usually higher than other types of car finance
  • You must pay for fully comprehensive vehicle insurance

Car Leasing

What is Car Leasing?

Car leasing, not that we’re biased… is one of the most popular car financing options due to its simplicity and fixed payments. 

Car leasing in its nature is quite simple, you pay a deposit at the beginning (usually equivalent to several monthly payments), then continue to make monthly payments for a fixed period. 

You can take out car leasing for a select range of durations, 12, 24, 36, 48-month contracts. While some lenders can be more flexible, the standard contract is either 24 or 36 months.

There are many benefits that accompany car leasing, on top of low costs, simplicity and convenience, car leasing is also made available to those with bad credit.

Options at the End of the Contract

With car leasing, you are technically hiring or ‘renting’ the vehicle out for a fixed amount of time. You do not own the car throughout your contract, leaving you to comfortably drive your car back to the lot and walk away, stress-free.

Alternatively, we do offer to deliver your vehicle and collect it at the cost of £1 per mile (with a minimum cost of £50). 

Tax, Insurance and Maintenance

Fortunately, car leasing is kitted with pretty much everything you’d need throughout your contract. 

With car leasing, road tax is covered by the monthly payments and included in your contract. While maintenance of the vehicle is your responsibility, this is made much easier with a full 3 years warranty, and a full-service plan.  

The only thing you need to worry about is insurance. Car leasing requires a fully comprehensive policy to be set up, prior to the collection of the car. 

Hyundai i20 1.2 SE 5 Door

Pros of Car Leasing?

  • Has the ability to improve your credit score over time with monthly payments
  • Depreciation who? Since you don’t own the car, depreciation isn’t your problem
  • You could end up driving a car that you wouldn’t be able to afford to buy outright
  • Simple and convenient
  • Offers delivery and collection services
  • The majority of the upkeep ie. maintenance and tax is included
  • You have the freedom to swap your cars every few years or so
  • Available to those with a poor credit history

Cons of Car Leasing?

  • Car leasing generally requires a good credit score
  • You do not own the vehicle
  • Deposits can sometimes be higher than other types of finance

Should I Choose Car Leasing Or PCP?

Still wondering who would win if they come to blows, PCP or car leasing? The answer is very much subjective and is up to you to decide who walks away the winner. 

While PCP provides much more flexibility especially if your financial situation may change throughout your contract, car leasing is usually cheaper and provides a simpler process. 

PCP contracts tend to be more flexible throughout. If your family doubles in size, so does the size of your car and that is not a problem with PCP. It is possible to swap, exchange your vehicle part way through – despite this leaving you with some negative equity.

Car leasing puts you behind the wheel of a brand new or preowned car every few years. You don’t need to worry about the depreciation as you don’t own the car, you can hand back the keys and swap it for a shiny new one.

With car leasing, you also don’t need to worry about what happens if something goes wrong with your car. Your Fiat 500x on lease comes with its first year’s road license, a full service and warranty plan – the only thing you need to worry about is insurance. 

The major advantage that car leasing has over PCP is that there are options available for people with a bad credit score. 

Here at Wheels4Sure, we provide car leasing that looks less at your credit score and more at your ability to make repayments, giving you a fighting chance to drive away happy!

kia carens car on the road

Affordable Car Leasing For Poor Credit History At Wheels4Sure

Wheels4Sure provides simple and affordable car leasing for bad credit. If you have a poor or non-existent credit history, we provide a car leasing model that is based on affordability, not your credit score.

With the benefits of improving your credit score, driving a brand-new car and saving money, you’ll wonder why you never considered car leasing with Wheels4Sure before! And with a 95% acceptance rate, we challenge you to find a reason not to!

If this has left you screaming ‘sign me up!’ and you’d like to find out more. Simply fill out our enquiry form or call us on 0203 823 1010 to speak to one of our personal advisors.

If you’re wondering what cars we have available, have a gander at our selection of car leasing deals. From an extensive group of premium brands such as Hyundai, Peugeot, and Mazda, we’re confident we have a set of wheels that’ll catch your eye.

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