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PCP versus PCH, WTF?

PCP and PCH are terms used when leasing but WTF do they mean?

PCP stands for Personal Contract Purchase

With a PCP you will pay on average 10% of the value of the car as an initial payment, then set monthly repayments to the end of your agreement.  when you begin your contract agreement a value of the car will be specified and agreed, that price is referred to as a ‘balloon payment’.  The balloon payment is what you will need to pay at the end of your agreement in order to own the car outright.

Car Key with Leasing Tag on White

When your PCP agreement comes to an end, you will be given 3 options

  1. Buy the car ‘Balloon Payment’

  2. Exchange for another car using the equity of the car you already have

  3. Walk away

Its worth noting that with a PCP:

  • When your agreement comes to an end the car must be in good condition, you will be liable for any repairs that need to be made to the car.

  • You will have an agreed mileage, if you go over the mileage you will have to pay extra / mile.

  • Your equity is in that car, therefore you will have to stick with that specific dealership to be able to benefit from the equity. If you wish to move to a different dealer your equity is lost.

PCH stands for Personal Contract Hire

You will find as a consumer a lot more deals out there for PCH, (particularly if you are a customer that has good credit and fall into mainstream), with many mainstream leasing companies waivering the initial payment.

What is meant by an initial payment?

no road tax to pay when leasing PCH or PCP

An initial payment is  ‘x’ times your monthly repayments, for example –

If your monthly repayments on a car are £200/month, you may be asked for 3 repayments up front meaning your initial payment will be £600.  This is a 3 (3 months payments in one go) x 36 (followed by 36 single monthly payments) payment profile.

Your initial payment is the followed by set monthly payments, which makes life very easy when you are managing your budget.

If you fall into subprime (meaning you have a poor or bad credit rating) be careful of car leasing adverts that seem to fall into mainstream deals.  In many cases the cars advertised can be over 4 / 5 years old, this means that you may be leasing a car which could give you problems during your leasing term.  At UltraCar we lease cars no older than a year old, which means in many cases the cars will still have their manufacturers warranty.

Take a look at payment profiles when looking at advertised vehicles on car leasing sites, this will help you work out what you will need to pay as an initial payment and what your monthly payments will be.  At UltraCar we are able to create leasing agreements tailored to your individual budget, and therefore only show example cars and prices on their website.

When your PCH agreement comes to an end you will be given 2 options

  1. Renew (with UltraCar no need to pay another initial payment)

  2. Walk away

Driver happy with leased car through PCH

Its worth noting that for PCH:

  • When your agreement comes to an end the car must be in fair wear and tear condition, you will be liable for any major repairs that need to be made to the car.

  • You will have an agreed mileage, if you go over the mileage you will have to pay extra / mile.

  • You do not have any equity in the car, which means you are able to shop around to find you next car leasing deal.

  • Monthly repayments are usually lower than PCP or a car loans.

  • No car depreciation value worries

  • No Road Tax to pay

How do your friends and neighbours afford expensive cars every 3 years.

The answer is they probably have a personal lease (PCH) which allows them to renew their car every 3 years.

There are so many advantages to leasing a car, no worries of your car depreciating in value, no road tax to pay, being able to get a car on lease that perhaps you could not afford to purchase.  If you have a bad credit rating take a look here and find out how you can lease a car.

So that’s PCH and PCP explained, as for WTF, well we all pretty much know what that means!