PCP Versus PCH

Jess08 · 27 May 2008 at 2:15PM

HI

I was wondering if any one could give me some advice.

I have recently started a new job which entitles me to a monthly car allowance. I will be doing a lot of mileage and have therefore decided to sell my current car as it will quickly depreciate with the amount of mileage i will be doing and look at some form of lease car.

The two options that I am looking at are Personal Contract Hire (PCH) and Personal Contract Purchase (PCP).

Has anyone got any advice on the strengths and weaknesses of each scheme so i can work out what would be the best deal for me? I am finding it difficult to get an unbiased opinion (i have already approached a number of car dealerships but they just want to sell me a car!)

Is it best to go direct to a mains dealer or go through a broker?
Are there penalties for coming out the contract early?
If i go over the declared millage at the end of the term will i have to pay a penalty?

I also want to know if i take out a car on PCH is it classed as a loan against my name? The reason i ask is my mortgage is up for renewal soon- if i have a car on PCH will this show as £18,000 car debt against me or is it just classed as a monthly outgoing? I wouldn't want it to effect what type of mortage i can be offered.

Any advice would be welcome.

Thanks

Jess:j

zeon999 · 27 May 2008 at 3:16PM

PCH and PCP are pretty much the same thing only real difference being at the end of the PCP contract you are able to buy the vehicle at an agreed rate if you wish, alternatively you can simply hand the vehicle back like you would with PCH at no extra cost.

Generally PCH works out slightly cheaper though if you don’t want the option of buying the vehicle at the end of the leasing contract. This is not always the case though so if your not bothered about buying the vehicle at the end then just go with which ever you can get the best rental rates for.

"Is it best to go direct to a mains dealer or go through a broker?"

Well very often you can get better prices at brokers for some reason they are able to get great discounts and don’t expect to make such a large cut as main dealers. But this is not always the case so my only advise here is to have a look around.

"Are there penalties for coming out the contract early?"

Yes, also always enquire on stuff like this before taking out the contract as different company’s charge different rates. Be sure you know exactly what your getting into before signing a leasing contract.

"If i go over the declared mileage at the end of the term will i have to pay a penalty?"

Yes and same again look into it before signing the contract different company’s charge different rates and if your not happy about something then dont be scared to ask if then are able to arange something different for you. You may have to pay a little extra monthly rental but are in a better position in terms of charges for breaking the contract.

Take into consideration these things also when finding a contract, its all very well finding a great price but if the contract has a very high rate for something else on the "hidden costs" then it may not be such a great offer.

As for the finance counting as a loan against your name yes it does kind of but not in the way you mentioned. The full £18,000 is not counted against your name as that’s not the deal you have. But you will have finance linked to your name, this should not effect your mortgage options though.

I one way it should really be a benefit if you have maintenance with your leasing contract, as in this case you have set costs for your vehicle. As in you won’t suddenly have to pay for an expensive service or repair costs.

I hope this has helped you anyway.

Total Fleet Services are a good leasing broker and well worth contacting.
http://www.lease-hire.co.uk

AdrianHi · 28 May 2008 at 1:15PM

Watch out for the PCP deals which are usually front loaded with interest payments which leaves you with most of the capital to still pay back early on when the asset you have borrowed against has depreciated considerably. You might want to consider RTI (Return To Invoice) insurance (not the GAP insurance the dealer will try to sell you) to guard against the car getting written off in an accident of theft leaving you up the creek without a paddle so to speak.
A safer bet unless you are 100% sure of keeping the car for the whole 3 year period is "balanced lease purchase" which Lombard Direct were doing at 6.9% APR not so long ago. Similar to PCP with the end of term balloon payment, you can use this on new or nearly new cars and is safer because you pay back interest and capital every month, i.e. it is not front loaded with interest payments. The downside is you are responsible for selling the car and settling the finance or paying the balloon and keeping the car.

nickmack · 28 May 2008 at 2:37PM

zeon999 wrote: »

As for the finance counting as a loan against your name yes it does kind of but not in the way you mentioned. The full £18,000 is not counted against your name as that’s not the deal you have. But you will have finance linked to your name, this should not effect your mortgage options though.

I have PCH and the difference between the total amount I'm paying over the contract period and the value of the car is shown as an outstanding balance on my report. This is not PCP so I have no option to purchase the vehicle at the end of the term, so it may occur with the OP!

daveyjp · 28 May 2008 at 3:03PM

If you are doing high mileage forget PCP if you have any thoughts of handing the car back - excess mileage charges can be upwards of 5p per mile and the starting level is generally 10,000 per annum max.

If your current car is up to the mileage keep it. Your monthly car allowance is to compensate you for running costs including depreciation.

standupguy · 28 May 2008 at 5:53PM

This is an exciting time - new job and new car but have you given a thought to any what ifs?

No job is secure until 12 months have elapsed - what if you lost your job or made redundant - you would be left with an £18k Finance agreement?

Do you have to buy a new car?
You can buy a nearly new car - well discounted from a car supermarket - with say 30 months manufacturers warranty left for about £9000, do 60000 miles and still sell it for £4500 3 years later - depreciation minimal.

Why not consider making yourself some money from this opportunity by pocketing the difference between your car allowance and the lower monthly repayment and don't forget the extra tax relief on the business mileage you do.

And Remember, after 3 years you still have a car worth £4500

PCP Versus PCH

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