PCP and PCH dilemma
Discussion
I had a search on here but not much turned up.
I've mostly PCP'd my cars for the last 15yrs or so. I've always managed to get my deposit back out as equity and generally put this down towards the next car at the end of the 3or4yr deal.
As the market is evolving with Hybrid/EV I'm concerned getting the initial deposit back out is going to be a struggle, if anything it might be a simple hand back at the end of term.
That got me looking at PCH which is basically payments over a term and a handback. The monthly payments however can be substantially less therefore meaning the total cost can be vastly less.
Anyone moved from PCP to PCH, pros & cons ?
I'd also be keen to hear if anyone has managed to purchase their car at the end of a PCH, internet has rumours that this happens on occasions where you offer to buy from the lease provider opposed to them offloading to an auction or the like.
I've mostly PCP'd my cars for the last 15yrs or so. I've always managed to get my deposit back out as equity and generally put this down towards the next car at the end of the 3or4yr deal.
As the market is evolving with Hybrid/EV I'm concerned getting the initial deposit back out is going to be a struggle, if anything it might be a simple hand back at the end of term.
That got me looking at PCH which is basically payments over a term and a handback. The monthly payments however can be substantially less therefore meaning the total cost can be vastly less.
Anyone moved from PCP to PCH, pros & cons ?
I'd also be keen to hear if anyone has managed to purchase their car at the end of a PCH, internet has rumours that this happens on occasions where you offer to buy from the lease provider opposed to them offloading to an auction or the like.
CG2020UK said:
PCP seems to be the most expensive way to own a car currently
You dont own a car with PCH though.PCP can still work if its 0% or a very low APR.
Its likely there'll be cheaper PCH rental deals out there, but for ownership options then PCP gives you a guaranteed route to buy the car at the end of the term. PCH doesnt.
I am in a similar position, always PCP'd and have always got the deposit back out for the next one! Following the thread closely.
A theory though, and I am looking for a bit of a sanity check here...
PCH, you pay £10k over 3 years and hand the car back - total cost £10k.
PCP, your deposit of £3k plus payments of £200 over 3 years, is £10k again - you pay the balloon of say £12k and you have a £15k car to show for it. Am I right in thinking the £200pm payment, so much of it is equity?
So if you was to buy a car on normal HP, and pay £300pm - with depreciation factored in, essentially £200pm of that £300 is 'equity' and not dead money like PCH? Am I making sense or is this the ramblings of a mad man.
A theory though, and I am looking for a bit of a sanity check here...
PCH, you pay £10k over 3 years and hand the car back - total cost £10k.
PCP, your deposit of £3k plus payments of £200 over 3 years, is £10k again - you pay the balloon of say £12k and you have a £15k car to show for it. Am I right in thinking the £200pm payment, so much of it is equity?
So if you was to buy a car on normal HP, and pay £300pm - with depreciation factored in, essentially £200pm of that £300 is 'equity' and not dead money like PCH? Am I making sense or is this the ramblings of a mad man.
CG2020UK said:
PCP seems to be the most expensive way to own a car currently
Depends on the interest rate and on whether you’re a serial every 3 year buyer or not.As with leasing, if you chase the deal rather than a specific car, you can get a decent deal with deposit contributions, low rate finance and little or no deposit required especially on run out models.
On used though it makes little sense at the moment as interest charges are far too high with most around the 10-13% range
With leasing, it's much harder to get out of the contract economically if you have a life event meaning the car is no longer needed or suitable - or you lose your job.
At the end of lease, you MAY be able to extend at reasonable terms to allow you to get into another car. Likewise, it's up to the funder if you (or a relative/friend) if they want to sell the car, and often the price they want is Main Dealer money. Leasing car collection agents van be harsh with wear and tear damage, but things like scuffed alloys will be cheaper to leave than get them repaired yourself.
Options on lease cars can be expensive as the funder may spread the options cost, including metallic paint etc over the lease term.
As has been said, with a lease, chase the deal, not the car. If you're fussy, go PCP. There are exceptions to this rule though! Look at the now expired Honda eny:1 PCP deal recently.
At the end of lease, you MAY be able to extend at reasonable terms to allow you to get into another car. Likewise, it's up to the funder if you (or a relative/friend) if they want to sell the car, and often the price they want is Main Dealer money. Leasing car collection agents van be harsh with wear and tear damage, but things like scuffed alloys will be cheaper to leave than get them repaired yourself.
Options on lease cars can be expensive as the funder may spread the options cost, including metallic paint etc over the lease term.
As has been said, with a lease, chase the deal, not the car. If you're fussy, go PCP. There are exceptions to this rule though! Look at the now expired Honda eny:1 PCP deal recently.
Abc321 said:
I am in a similar position, always PCP'd and have always got the deposit back out for the next one! Following the thread closely.
A theory though, and I am looking for a bit of a sanity check here...
PCH, you pay £10k over 3 years and hand the car back - total cost £10k.
PCP, your deposit of £3k plus payments of £200 over 3 years, is £10k again - you pay the balloon of say £12k and you have a £15k car to show for it. Am I right in thinking the £200pm payment, so much of it is equity?
So if you was to buy a car on normal HP, and pay £300pm - with depreciation factored in, essentially £200pm of that £300 is 'equity' and not dead money like PCH? Am I making sense or is this the ramblings of a mad man.
Most of that £200 payment on PCP went on the depreciation. A theory though, and I am looking for a bit of a sanity check here...
PCH, you pay £10k over 3 years and hand the car back - total cost £10k.
PCP, your deposit of £3k plus payments of £200 over 3 years, is £10k again - you pay the balloon of say £12k and you have a £15k car to show for it. Am I right in thinking the £200pm payment, so much of it is equity?
So if you was to buy a car on normal HP, and pay £300pm - with depreciation factored in, essentially £200pm of that £300 is 'equity' and not dead money like PCH? Am I making sense or is this the ramblings of a mad man.
For your PCP example, you have forked out
10k + 12k = 22k
With £15k equity in the car, it means you would have paid out
22k - 15k = £7k for the term of use, if you sold at the end.
So in this case. the PCP is a better deal than the lease for the term of use.
A lot depends on if you think you’d want to keep the car, the deals available etc.
You have fire up a spreadsheet and do the sums.
Generally from what I’ve seen, the deals available on PCH are a lot better than PCP, stuff like the Honda eny1 deal mentioned above are exceptions.
For my use case, where because of little terrors, I want worry free, warrantied family motoring, PCH makes a lot more sense.
Right now, the PCH market has a lot of deals for shorter 2 year leases, where the monthlies won’t even begin to cover depreciation. So I’d plump for one of those.
Use a brand new car under warranty.
Hand it back at the end of 2yrs after 1 service. No need to worry about MOT’s, any sort of maintenance beyond an occasional wash at my local slave labour / money laundering operation.
Main disadvantage is, for the best deals, I can’t pick the exact car I want, can only point myself at the C Segment cross over category, but given the nature of family motoring, I don’t mind this. Most cars these days are more than good enough to cart around little terrors on the school run.
Edited by wyson on Wednesday 19th February 09:33
99% of the time, the best PCH deal will be better than the best PCP deal of the same car, simply because the APR on Pcp covers the whole value of the car, not just the monthlies.
Also PCH will just cover depreciation, Pcp will be higher to cover depreciation and to build up 'equity' to coax you in to another deal in 3/4 years. Except this equity is actually costing you the APR, plus the missed potential of this extra cash being in a 4%+ saver account. You've given the lender a free loan. Not an issue 10 years ago when rates were near 0%, but on a £20k car you're missing out £2000 or so in interest over 4 years, more if the Pcp isn't 0%.
PCH also includes VED (other than when go increases it and you pay the difference) , Pcp youre responsible for it it yourself.
Also PCH will just cover depreciation, Pcp will be higher to cover depreciation and to build up 'equity' to coax you in to another deal in 3/4 years. Except this equity is actually costing you the APR, plus the missed potential of this extra cash being in a 4%+ saver account. You've given the lender a free loan. Not an issue 10 years ago when rates were near 0%, but on a £20k car you're missing out £2000 or so in interest over 4 years, more if the Pcp isn't 0%.
PCH also includes VED (other than when go increases it and you pay the difference) , Pcp youre responsible for it it yourself.
Edited by jaydeeuk1 on Wednesday 19th February 10:43
Deep Thought said:
You dont own a car with PCH though.
PCP can still work if its 0% or a very low APR.
Its likely there'll be cheaper PCH rental deals out there, but for ownership options then PCP gives you a guaranteed route to buy the car at the end of the term. PCH doesnt.
You technically don’t own the car with PCP either.PCP can still work if its 0% or a very low APR.
Its likely there'll be cheaper PCH rental deals out there, but for ownership options then PCP gives you a guaranteed route to buy the car at the end of the term. PCH doesnt.
The amount of PCP cars that are actually purchased is a small %.
Best to just look at it as a cost to own over a set period calculation. Usually Leasing or PCH typically comes out on top of PCP by a good margin these days.
CG2020UK said:
Deep Thought said:
You dont own a car with PCH though.
PCP can still work if its 0% or a very low APR.
Its likely there'll be cheaper PCH rental deals out there, but for ownership options then PCP gives you a guaranteed route to buy the car at the end of the term. PCH doesnt.
You technically don’t own the car with PCP either.PCP can still work if its 0% or a very low APR.
Its likely there'll be cheaper PCH rental deals out there, but for ownership options then PCP gives you a guaranteed route to buy the car at the end of the term. PCH doesnt.
The amount of PCP cars that are actually purchased is a small %.
Best to just look at it as a cost to own over a set period calculation. Usually Leasing or PCH typically comes out on top of PCP by a good margin these days.
I've looked at PCH in the recent past, but always been a little spooked by the fact that (a) you dont have any automatic route to buy the car and (b) it can be eye wateringly expensive to get out of the hire agreement early.
Leasing / PCH will almost certainly be cheaper, but you dont own the car. It really has to be viewed as a rental.
Deep Thought said:
You'd said "to own a car". With PCP you can own the car at the end of the term. With PCH you have no option to own (though the hirer may allow you to buy the car, but there are no guarantees).
I've looked at PCH in the recent past, but always been a little spooked by the fact that (a) you dont have any automatic route to buy the car and (b) it can be eye wateringly expensive to get out of the hire agreement early.
Leasing / PCH will almost certainly be cheaper, but you dont own the car. It really has to be viewed as a rental.
A) that’s trueI've looked at PCH in the recent past, but always been a little spooked by the fact that (a) you dont have any automatic route to buy the car and (b) it can be eye wateringly expensive to get out of the hire agreement early.
Leasing / PCH will almost certainly be cheaper, but you dont own the car. It really has to be viewed as a rental.
B) I suppose you have to compare the termination charge risk versus what you’ll get hit on trade in plus additional you’ve spent and weight it up.
I know it’s a very on PH thing to say but as long as you have the keys and can drive it, I classify it as you own it at that period in time.
CG2020UK said:
A) that’s true
B) I suppose you have to compare the termination charge risk versus what you’ll get hit on trade in plus additional you’ve spent and weight it up.
I know it’s a very on PH thing to say but as long as you have the keys and can drive it, I classify it as you own it at that period in time.
Agreed on all accounts. B) I suppose you have to compare the termination charge risk versus what you’ll get hit on trade in plus additional you’ve spent and weight it up.
I know it’s a very on PH thing to say but as long as you have the keys and can drive it, I classify it as you own it at that period in time.
Its a long time since i've done either and i had a look at a new Tesla Model 3 on PCH or a new Cupra Born VZ on PCP.
There were pros and cons to each, as you say. Neither were without downsides.
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