There are numerous options available for owning a vehicle, ranging from PCP finance to personal loans to HP agreements. However, have you considered the possibility of leasing your next vehicle?

While popular in the US, leasing, particularly Personal Contract Hire (PCH), is gaining attention in the UK as well. PCH allows you to enjoy driving a superior car without concerns about depreciation or retail value.

Our guide to personal car leasing will provide insight into the advantages and disadvantages of opting for PCH. We’ll also offer guidance on finding the best PCH deals and properly comparing leasing options against other financing methods such as PCP or outright purchase. While businesses often benefit from vehicle leasing, individuals can also reap advantages, making it a worthwhile consideration for your next car acquisition.

What is personal car leasing?

Personal Car Hire (PCH) operates as a long-term car rental agreement where you pay a deposit and monthly fee for a vehicle. At the end of the contract period, you simply return the car and move on. One of the primary advantages of personal car leasing is its simplicity – once you’re aware of the deposit and monthly fees, that’s the extent of your financial commitment for the contract duration.

PCH leasing often proves to be the quickest and most cost-effective route to driving a new car. The overall cost tends to be lower than purchasing or financing a new vehicle, enabling you to consider more upscale and premium options. 

This makes leasing particularly appealing for higher-end cars rather than smaller family hatchbacks. Additionally, leasing a new car typically include the benefits like the manufacturer warranty, exemption from MOT for the first 3 years, road tax, breakdown cover, and sometimes servicing.

For business owners with a VAT-registered business, leasing offers the advantage of deducting costs from profits and reclaiming 50% of the VAT, making it a popular choice for company cars. However, it’s essential to be cautious when comparing quotes, as some comparison sites may target business customers and exclude VAT costs, potentially leading to misleadingly lower prices.

It’s important to note that choosing PCH leasing means you won’t own the car or receive any proceeds from its sale. Your contract will specify an agreed mileage limit, with charges for exceeding it. Additionally, you may incur additional costs for damage or if the car is written off, although most leasing companies adhere to the British Vehicle Rental & Leasing Association fair wear and tear policy.

Types of car leasing 

While the core principles of leasing a car remain consistent, there are slight variations depending on the provide. Leasing companies typically allow you to specify the exact car you want and will deliver it after your initial payment.

Online brokers can facilitate the process by matching you with an appropriate leasing company. serving as intermediaries to streamline the process.

Additionally, car dealerships may offer leasing options as part of their car finance services. These leases, whether through franchised or independent dealerships, are often arranged with specialist leasing companies. While some may be branded under the car manufacturer’s name, this type of financing is less common than other dealer finance products, so not all dealerships offer it.  It’s advisable to check with dealerships and compare their offers against any online deals you’ve researched.

One effective method for finding leasing deals is to compare offers on platforms like Moneyshake, which can help you identify the most competitive leasing rates available.

Leasing Repayment

A significant distinction between PCH and PCP is that terminating a car leasing agreement early is generally not possible with PCH. However, with PCP, you typically have the option to end the contract early by paying an additional fee if your financial situation changes.

In the case of PCP, if you have paid or are capable or paying at least half the cost of the car, you have the right to return it. Conversely, missing payments on a PCH agreement may result in late payment fees, and lenders may seek to repossess the vehicle promptly to mitigate depreciation while outstanding bills are settled. Additionally, defaulting on a PCH agreement will result in a negative mark on your credit file. Essentially, the only viable method to terminate a PCH agreement early is by settling the total lease costs in full.

If you encounter financial difficulties, it’s advisable to promptly communicate with the finance company, as they may offer options such as reduced payments over an extended lease period to alleviate your situation.

The Deposit

When aiming to reduce your monthly payments, opting for a higher deposit can make a significant difference. Technically referred to as an initial payment, it’s non-refundable and typically set by the finance house or leasing company. PCH often entails a smaller initial payment compared to other finance options since you’re contributing towards owning the vehicle in the future. This initial payment is usually calculated as a multiple of your monthly payments. 

While the total amount you pay remains unchanged regardless of your deposit, a larger upfront payment results in lower payments for the remainder of the contract.

The concept of no deposit car leasing is gaining popularity as it eliminates the need for an upfront payment. However, to qualify, you’ll need an excellent credit rating score. While no deposit car leasing entails higher monthly payments throughout the lease term, passing the credit check process allows you to acquire a new car immediately without saving for a deposit.