Nationwide Vehicle Contracts explains whether you should choose a PCH or PCP lease agreement based on your circumstances, budget, and end-of-contract needs.
Leasing a car can be a daunting process if you've never done it before. A lot of choices need to be made on your end, and none are more important than choosing your contract type.
Most people go for one of two choices, Personal Contract Hire (PCH) or Personal Contract Purchase (PCP). But what are the differences between the two, and which one should you choose?
In this blog, we explore both contract types to help individuals make an informed decision when leasing a car.
PCH and PCP: The differences
Personal Contract Hire (PCH)
Personal Contract Hire (PCH) is a long-term vehicle rental agreement. You pay fixed monthly payments for the contract term, then return the vehicle at the end of the agreement, leaving the finance company to worry about depreciation values.
If you're looking for more information on PCH leasing, check out our comprehensive Personal Contract Hire Explained guide or watch the video below.
Personal Contract Purchase (PCP)
Personal Contract Purchase (PCP) is a lease agreement where the driver pays a series of monthly payments to cover the vehicle's depreciation. Then, at the end of the contract, you can purchase the vehicle or return it to the finance company.
If you're looking for more information on PCP leasing, check out our Personal Contract Purchase Explained guide.
So, which contract is right for me?
There are a few things you need to consider to ensure you choose the right lease agreement, such as the following:
Ownership/Flexibility:
If you're looking for a more flexible lease contract, PCH offers the advantage of not owning the vehicle, which means you can change cars easily at the end of your contract. However, if you want to keep the vehicle at the end of your contract, PCP is the choice for you.
Consider whether you want to change cars every few years or own the vehicle and gain it as an asset.
Monthly Payments and Upfront Costs:
Budget considerations are central to choosing a lease contract. PCH lease agreements typically come with lower monthly payments as you're only paying to rent the vehicle.
Whereas PCP lease agreements may have a higher deposit and monthly payments due to the potential ownership aspect. If you want to own the vehicle, you'll also need to pay the balloon payment, calculated at the contract's start.
PCH is undoubtedly the cheaper option if you're leasing on a strict budget. However, if you want to own the vehicle and are willing to pay more for this, then PCP is the choice.
End of Contract Options:
Evaluate your needs at the end of your contract, such as your personal and work situation. If you know you're going to be settled in a specific location and want to increase your assets, then PCP helps facilitate this.
However, if you're unsure about your circumstances at the end of your contract, PCH would be more stress-free as you don't have to consider ownership of the vehicle.
Conclusion
Choosing between Personal Contract Hire (PCH) and Personal Contract Purchase (PCP) for leasing a car ultimately depends on individual preferences and circumstances. PCH offers flexibility, lower monthly payments, and no ownership considerations at the end of the contract.
PCP, conversely, is suited to those who want to own the vehicle at the end of the contract.
Before making a decision, you must consider your priorities, budget, long-term plans, and desire for ownership.
Thinking about leasing your next car? Nationwide Vehicle Contracts is one of the UK's largest car leasing brokers and offer a range of leasing deals to suit your every need.
We also produce various car leasing blogs to help you, such as A Comparison of the Different Car Leasing Options and How to Choose a Car Leasing Company You Can Trust.
