What’s the Difference Between PCP and Leasing a car?
Last updated on July 19th, 2024 at 02:54 am
Acquiring a car can be financially challenging and requires lots of careful planning. If you want a car, there are lots of options available, including car leasing and Personal Contract Purchase (PCP).
PCP and car leasing are available for different classes of cars, with Audi car leasing being one of the more popular considerations. While PCP and car look similar at first glance, they also differ in many ways.
What is car leasing?
A car lease is a contract that gives you possession of a car for an established period, usually between three to four years. You can compare it to renting apartments for rent in Huntington Beach for some time while making monthly payments during your tenancy.
Car leasing grants you access to your chosen vehicle in exchange for monthly payments within that period. It is one of the most affordable methods of getting a car because you are not required to purchase it outright, which can be financially tasking.
After choosing your vehicle, you can speak with the dealership about the annual car mileage, your monthly lease payment, how it will be calculated, sealing, your expected down payment, etc.
Car leasing gives you access to different kinds of cars, and you need not worry as your car is covered by a warranty, lowering maintenance costs.
What is a Personal Contract Purchase (PCP)?
Personal Contract Purchase, also known as PCP, is a type of high purchase agreement that lets you spread your car’s cost over time. The deal is typically between three to four years and requires a deposit payment.
At the end of the contract, you can elect to purchase the car, swap it for a new one, or return it to the dealership. The Personal Contract Purchase comes with several benefits such as reduced monthly payment, flexible terms, lower interest rates, etc.
What are the differences between car leasing and PCP?
Personal contract purchase and leasing are two of the most common car financing methods. However, both concepts are not the same, and below are some of the major differences between PCP and car leasing:
1. Purchase Option
One of the significant differences between PCP and car leasing is that while a personal contract purchase provides you with an option to buy the car at the end of the contract, you are required to return the vehicle at the end of your car lease.
All lease vehicles belong to the dealership or financial providers that supply them. Therefore, you can’t retain the car upon the expiration of the lease. However, you can request an extension of your lease, which may require charges or fees.
A PCP is more suitable for persons looking to purchase a car, as you will only need to pay the pre-agreed final sum on the contract.
2. Ease of termination
It is easier to terminate a personal contract purchase than a lease contract. A lease contract is determined by the time you wish to possess the car, typically between three to four years.
However, suppose there are changes in circumstances resulting in a desire to terminate your lease. In that case, you will be required to pay a termination fee, which is conventionally set at 50% of the outstanding payments on the lease contract.
A PCP is easier to terminate since you are not required to pay 50% of the agreement if you decide to opt out. If you have paid over 50% of the contract, you can leave early. However, you might still have to cover the balloon payment as well as any interest accrued or other fees.
3. Maintenance Cost
Most car lease contracts include a maintenance package for repairs, routine servicing, and replacements. You only have to worry about minor costs like replacing tires, and you don’t have to worry about any major costs since most lease vehicles are brand-new.
A PCP does not cover maintenance unless expressly provided by the car’s manufacturer. Therefore, you will be liable to cover the costs of care and other repair expenses that could arise in the course of the contract.
Conclusion
Personal contract purchase and car leasing are two great ways to finance your car. Each method provides amazing options you can explore while shopping for a car. However, ensure you take note of the differences highlighted above when making your car financing choice.
