With the new car industry in a state of flux over recent years the market is increasingly being driven by two kinds of finance. Between 80% and 90% of new cars are currently financed by either personal contract hire (PCH) or personal contract purchase (PCP).
In the past similar finance has been almost exclusively used by the corporate world and fleet operators, but in recent years it has become the default mechanism for individual car purchases, so how does it work and which option is right for you?
If you are looking for a long-term lease but are not interested in purchasing the vehicle a PCH deal could be a good choice. The agreement will last two to five years, and you will pay a deposit upfront, usually around three months’ rental. Monthly payments may be higher than a similar vehicle on a PCP scheme, but over the length of the contract you will usually pay less. Often deals are available including road tax and servicing, although there will be strict limits on mileage which should not be breached as this can prove costly.
PCH lets you drive a new car every few years with relatively low monthly payments and no concerns over the vehicle’s re-sale value. PCP is similar but allows you to purchase the car outright at the end of a defined period with a single one-off period.
If you are looking at these alternatives for purchase or car leasing Leicester offers reliable options at sites such as https://leasing.totalmotion.co.uk.
It is important that you find a trusted provider since concerns have been expressed about the possible mis-selling of these schemes, prompting a review by the Financial Conduct.
According to the Finance and Lending Association, a leading industry body, four out of five people do not opt to purchase their vehicle outright at the end of the contract. If this is likely to be the outcome of your arrangement you may be better off choosing a PCH plan. It is important to be certain that you can afford the payments, because if you cancel your arrangement you may have to pay the leasing costs in full.
If you do not purchase at the end of a PCP you simply hand the vehicle back, as your payments have covered depreciation.