Personal contract hire or PCP

[Marc118]

Hi,
Long time lurker but this is my first post on here.
I'm looking at changing my car Audi A5 cabriolet which is coming up to 3 years old in the next few months.

I'm looking at changing to an Audi Q5 or a VW Touareg and was going to purchase it by way of PCP. However, I read a post earlier on here about personal contract hire.
I like to change my car every 3 years and I'm not bothered about 'owning' the car.
I've searched on the forum and came across many useful posts but none that were that recent.

I guess I would like to know why choose PCP over personal contract hire?

Also what are the best deals out there on the above cars? And what are the best leasing companies out there?

[sidicks]

Marc118 said:

Hi,
Long time lurker but this is my first post on here.
I'm looking at changing my car Audi A5 cabriolet which is coming up to 3 years old in the next few months.

I'm looking at changing to an Audi Q5 or a VW Touareg and was going to purchase it by way of PCP. However, I read a post earlier on here about personal contract hire.
I like to change my car every 3 years and I'm not bothered about 'owning' the car.
I've searched on the forum and came across many useful posts but none that were that recent.

I guess I would like to know why choose PCP over personal contract hire?

Also what are the best deals out there on the above cars? And what are the best leasing companies out there?

Put very simply:

Contract hire gives you a fixed payment over the period to 'hire' the vehicle'. Assuming you comply with the requirements of the agreement (mileage limit etc), you have no interest in the value of the car at the end of the agreement.

In contrast, with a PCP you have the option to purchase the car (for an amount fixed at the start of the contract) at the end of the agreement, so have some potential upside to the value of the car. If you don't want to own the car at then of the agreement, if the car is worth more than the final payment, then you can use that difference as a deposit for a new agreement.

Edited by sidicks on Sunday 8th March 15:44

[Marc118]

Thanks for clarifying that.
I've had cars on PCP in the past but never on PCH. I'd prefer to keep changing the car every 3 years and not have to worry about the cost of the car at the end of the term which makes the PCH so appealing.

Unless audi were to give 0% finance!!



What are some good leasing companies out there? Or are they all the same?

[rfoster]

The Touareg in particular is very competitively priced on a personal contract hire agreement - that's because VW are subsidising the vehicles to make them attractively priced against the likes of the X5 and Grand Cherokees.

I can help with some figures - been a leasing broker for 20 year this year. If you can let me know what mileage you think you'll cover, and any preferable spec, I'll send you a mail with some figures.

Cheers, Richard.

[Marc118]

Hi Richard,

Yes I'd definatly appreciate some figures.
Can you send me further info through?

I'd be looking at hiring for 3 years with maybe 10k miles per year.
I like the look of the R-Line.

Edited by Marc118 on Monday 9th March 21:44

[rfoster]

Email sent Marc, let me know if it doesn't arrive.

[MTech535]

Are PCH deals generally cheaper than PCP?

[rfoster]

Not always MTech, there's no hard and fast rule to it. You would assume the monthly figures, by the time VAT is added to the contract hire figures, would be similar on both agreements - but manufacturer support plays a huge part in the supply price and subsequently in the monthly rentals. Often this support is only available if a vehicle is supplied to a fleet funder (i.e. contract hire). So it's always worth comparing the two options.

[MTech535]

What are the advantages of a pch if the costs are the same? It seems to me the PCP is the same but with the option to purchase if you decide to.

What am I missing here?

[rfoster]

MTech535 said:

What are the advantages of a pch if the costs are the same? It seems to me the PCP is the same but with the option to purchase if you decide to.

What am I missing here?

Well - all things being equal, I'd take a PCP over a PCH. The reason for this are twofold.

1. On a PCP agreement, there's the potential for you to benefit from some equity in the car at the end of the term (if the car is worth more than the guaranteed future value) - and no risk if it is worth less. With a PCH you never own the vehicle and cannot benefit from the sale of the vehicle.

2. If you need to settle the agreement early at any time - then on a PCP agreement you will have the value of the vehicle to offset against your settlement figure. With a PCH you'll have to pay a termination fee just to hand the vehicle back to the finance company (with the main lenders this can be around 50% of the outstanding rentals -but manufacturer lease deals can be a considerably higher percentage.)

You do benefit from road fund licences being included on a PCH deal for the full term of the agreement, which you don't get on a PCP

Either way - if you're looking for a new car on finance, shop around for the best deals on PCP and PCH and see what works out best for you.

[MTech535]

The reasons you gave above are why I assumed the hire option would be cheaper.

But like you say, different deals will be better than others.

Thanks for clarifying.