PCP vs Lease: Which is Best for You?
PCP vs Lease: Which is Best for You?
There is no doubt that buying a car
is a big investment. Nowadays , various car financing plans and methods give drivers more choice and flexibility when it comes to purchasing a vehicle. More specifically, PCP
(Personal Contract Purchase) car finance and leasing are becoming increasingly popular choices for financing a car.
When it comes to PCP vs leasing or buying, both offer advantages to many drivers. However, choosing the right option for you is crucial for maximising long-term value and making your commitment worthwhile.
In this article, we will break down what PCP car finance is to help you make an informed decision on whether you should lease or purchase a vehicle.
What is PCP Car Finance and How Does it Work?
Personal Contract Purchase (PCP) is a flexible form of car finance that allows drivers to spread the upfront cost of a new or nearly new car over an agreed-upon term. PCP car deals
require you to pay an upfront deposit for the vehicle. You then contribute monthly repayments over the length of the contract.
At the end of the PCP contract,
you will have three options: return, renew or buy. You can choose to purchase the vehicle with an optional final payment. If you choose to renew, you may also be able to use any equity you’ve built during your contract towards a deposit for an upgraded car.
How Does PCP Work at the End of the Term?
If you choose to go down the PCP car finance route, you will pay an initial deposit (usually around 10%) and monthly payments on the outstanding balance.
At the end of the term you have three options:
- Pay an optional lump final payment to own the car.
- Return the car with no further costs (subject to mileage and condition).
- Part-exchange the car, using any equity as a deposit.
What is Car Leasing and is it Worth it?
Car leasing is an alternative to PCP car finance where you pay a monthly fee on a brand-new car over a set term or contract. A leasing agreement involves fixed-rate monthly payments, without interest, and an annual mileage limit that you must adhere to.
At the end of a leasing contract, you simply hand the car back. As the lessee, you are essentially renting the vehicle and have no option of owning it at the end of the lease term. You are also not covered by voluntary termination (VT) rights, meaning you cannot hand back the vehicle before your contract has ended.
What is Contract Hire Purchase?
Contract hire
purchasing has similar elements to both leasing and PCP. Hire purchase is a type of credit agreement where you pay a deposit and then pay off an agreed balance over a set period of time. Once you have made the final payment at the end of the contract, the car is legally yours.
PCP vs. Lease: The Pros
Aside from their shared benefit of eliminating the upfront cost, both PCP and lease have numerous individual advantages.
PCP Pros
More options at the end of the contract
PCP car finance provides three options when you reach the end of your contract, giving you greater flexibility
Opportunity to build equity
PCP gives drivers the opportunity to build equity over the course of their contract, which can then be used as part of a deposit for a newer model
Choice of cars
PCP deals include both new and used cars, so drivers can opt for an older car with more affordable rates
Early termination
PCP contracts may be able to be terminated early for an additional fee
Lower monthly payments
Monthly repayments tend to be lower than monthly lease payments
Flexible loan terms
PCP deals give you greater flexibility around how much you want to pay initially as a deposit as well as the length of your contract
Lease Pros
Brand new car
Car leasing allows you to drive a brand-new car at affordable monthly rates without paying an upfront cost
No interest
Unlike PCP, there is no interest on lease payments, so your monthly fee is fixed
Fixed price
With car leasing, you pay a fixed price each month that is set out from the beginning of your contract. With no interest or equity, you won’t find any unexpected costs or sudden increases
Lower deposit
Deposits tend to be lower for lease deals than with PCPs and can sometimes be as low as one month’s payment
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PCP vs. Lease: The Cons
Whatever you are considering, you should be aware of the disadvantages, limitations and complexities of PCP and leasing before you make a final decision.
PCP Cons
Includes interest
PCP car finance payments include a fixed interest rate
Mileage and damage charges
You will likely be charged for any damages to your vehicle or if you exceed the annual mileage set in your contract
Expensive balloon payment
Balloon payments to own the car outright can be expensive
Lease Cons
Less contract flexibility
Lease deals provide less flexibility with deposit payments and term lengths
Mileage and damage charges
You will be charged for any damages to your vehicle or if you exceed the annual mileage set in your contract
No choice to buy
You will not own the car at any point of your lease, with no option to buy at the end of the contract
Limited car choice
Lease is only available with brand-new cars, so drivers cannot cut costs by leasing used or old cars
No early termination
Lease agreements have no option for early termination of your contract
So, is leasing or buying a car better?
Both PCP and lease car finance options provide great alternatives for driving away in a new car without paying the upfront cost. Deciding which option is best for you ultimately comes down to assessing your own situation.
For instance, if you’re wanting to own the car at the end of your contract, a PCP car deal
may be worth consideration. However, if you simply want a fixed monthly payment on a brand-new car, leasing might be better than buying a car.
PCP with Kia
At Kia, we understand that purchasing a car is a big investment, so we want to give you more options to make owning your dream car possible. That’s why we provide flexible and tailored PCP car finance deals
on a wide range of cars, including SUVs,
family cars,
crossovers,
hatchbacks,
and more.
We strongly believe that planet-friendly driving should be accessible to everyone, which is why our PCP deals are available for a range of Hybrid,
Plug-In Hybrid,
and Electric cars.
These include the award-winning Kia EV6,
as well as the Niro EV,
Hybrid and Plug-In Hybrid and the Sportage
Hybrid.
Embrace what’s possible and join the future of driving when you explore PCP car deals
at Kia.
Images shown are for illustration purposes only and may not be to full UK specification. Features shown are not standard across the Kia model range and availability will vary dependant on model. For further details please refer to the individual model specification sheets.
*Fuel economy and emissions: driving range standards are calculated using the World Harmonised Light Vehicle Test Procedure (WLTP).
**There are certain situations in which the petrol engine will automatically activate even when the vehicle is in EV mode. Examples could include: when the hybrid battery state of charge is reduced to a certain level, when acceleration demand is high and/or when it is required to heat up the cabin.
*** Forward Collision-Avoidance Assist (FCA)
Forward Collision-Avoidance Assist (FCA) is an assistance system and does not relieve the driver from their responsibility to safely operate the vehicle at any time. The driver still has to adapt their driving behaviour to their personal driving capabilities, to the legal requirements and to the overall road and traffic conditions. FCA is not designed to drive the vehicle autonomously. For further information, please refer to the owner’s manual.