Personal Contract Hire vs Personal Contract Purchase

xsy77

Hi all,

Looking for some advise as I feel like a fish out of water here.

Have always "Inherited cars" from family members etc. Untill 2 years ago when I was given a company car. My boss has recently changed my package however and given me a car allowance instead of a company car. Basically my wages go up and I don't get a company car any-more.

On doing my research I have narrowed my options down to two:

PCP car X.
PCH car Y.

PCP option is a brand new model (not 1 being driven on the UK roads just now) however its over 3 years and stretches my budget to its MAXIMUM limit!

PCH option is over 2 years, has a lower deposit and is lower cost each month and I get "More car for my money".

On paper PCH is a clear winner?
However, what if I lose my job or my circumstances change?
If (for whatever reason) I cannot afford to make the re-payments 14 months into my agreement, what options do I have? Are they different fro PCP? Would PCP be better in this scenario?

or its there a 3rd option I haven't considered?

Please help, I need to make my final decision next week!

Thanks,
xsy

gazfocus

Are you sure you've got the two the right way round?

Usually, PCP is the cheaper option because they have a lump sum to pay at the end of the term if you wish to keep the car (or you can just hand the car back).

I've just bought a 1 year old car and when I went in, I said I wanted it on PCP because the monthly payments were cheaper. They instead stuck it on PCH so my payments are £70/m more but then I don't have a lump sum at the end. Unfortunately, I didn't realise until the paperwork was signed

zeon999

Only difference really is with Personal Contract Purchase (PCP) you have the option to purchase at the end of contract and PCH you don't.

Either option can be cheaper it depends on the car and finance company.

Both of them you are in a contract to make them payments and they both have much the same consequences if your unable to pay.

Timay

Also depends on what you want to do at the end of the agreement.

Do you want the option of buying the car at the end?

Or

Do you just want to give it back and swap for a brand new model in 2 years time.

PCH always usually have much lower deposits as they just as for 2 or 3 months rental up front.

If I was you I would go for PCH would have less strain on your finances, but the downside is you won't own anything.

xsy77

gazfocus wrote: »

Are you sure you've got the two the right way round?

Usually, PCP is the cheaper option because they have a lump sum to pay at the end of the term if you wish to keep the car (or you can just hand the car back).

I've just bought a 1 year old car and when I went in, I said I wanted it on PCP because the monthly payments were cheaper. They instead stuck it on PCH so my payments are £70/m more but then I don't have a lump sum at the end. Unfortunately, I didn't realise until the paperwork was signed

The PCP deal and PCH deals I am looking at are for different cars.

Strangely I cannot afford PCH on car 1 but can on car 2.
I can afford PCP on car 1 but not on car 2.

Weird I know.

Te "salesman" said I had more protection going with PCP, was this a fib?

Thanks,
Christopher

CB1878

PCH is purely a rental, the vehicle can never be yours. This may not be a bad thing really, as it is guaranteed to be a depreciating asset. PCP is a form of HP, so you can own the vehicle if you wish, and any 'equity' you retain above the balloon payment can be used for a deposit for a new vehicle, of you wish.

There are some fantastic deals on PCH at the moment, have seen some smaller cars around £50-£60 a month. Also you can get more prestige cars like Mercedes C Class for sub £250 a month. These prices are highly unlikely on PCP, but as has been pointed out you will never own the car.

PCP is really popular in motor dealers. I am not sure why the salesman says you have more protection on PCP, you might want him to explain that further. It could be that he has to pass you to his local business sales team if you go down the PCH route, and he will get by passed for the sale!

If you go down the route of PCH, make sure you tell your insurer that you want cover for a lease vehicle, some may be funny about covering them. Also be aware that you may be liable for an early termination settlement, including outstanding rentals with PCH, so it may be worth looking into a Gap policy to cover in the event.

xsy77

CB1878 wrote: »

PCH is purely a rental, the vehicle can never be yours. This may not be a bad thing really, as it is guaranteed to be a depreciating asset. PCP is a form of HP, so you can own the vehicle if you wish, and any 'equity' you retain above the balloon payment can be used for a deposit for a new vehicle, of you wish.

There are some fantastic deals on PCH at the moment, have seen some smaller cars around £50-£60 a month. Also you can get more prestige cars like Mercedes C Class for sub £250 a month. These prices are highly unlikely on PCP, but as has been pointed out you will never own the car.

PCP is really popular in motor dealers. I am not sure why the salesman says you have more protection on PCP, you might want him to explain that further. It could be that he has to pass you to his local business sales team if you go down the PCH route, and he will get by passed for the sale!

If you go down the route of PCH, make sure you tell your insurer that you want cover for a lease vehicle, some may be funny about covering them. Also be aware that you may be liable for an early termination settlement, including outstanding rentals with PCH, so it may be worth looking into a Gap policy to cover in the event.

Thanks for the advice. Could you explain further on GAP insurance... I am concerned that if I were to lose my job, i would not be able to keep up the payments. Would GAP insurance cover me against this? or purely if the vehicle is written off?

Thanks,
Christopher

plane_boy2000

GAP has nothing to do with making the repayments - it covers the difference between what you owe and the outstanding finance.

I've had my last 2 cars on PCH and will do so again - its just like hiring the car and handing it back. Some get het up that you never own it, but I dont care - its a depreciating asset so I just want to have the use of it as cheaply as possible.

Officially you have no option to buy with PHC but they will usually offer it to you at the end.

Regards losing your job then the issue is the same either way - you still need to make the payments.

One last thing - PCH usually includes road tax for the duration, but PCP will not. Its a nice feeling when your new tax disc just turns up in the post!

1jim

CB1878 wrote: »

There are some fantastic deals on PCH at the moment, have seen some smaller cars around £50-£60 a month.

Sorry to hijack this thread but what have you seen and from where at this price, quite interested in a little run around
Thanks

FlyingPasty

Hi,

I'm after some advice on how each of the above would affect a mortgage application?

I'm a first time buyer and looking to apply for a mortgage at the end of the year (I will have cleared my credit card by then) so would have no actual debt. I've only been driving about 3 years and so far i've had 2 cars which have lasted less than a year each before ending on the scrap heap. My latest car has been in and out of the garage lately - its in again this morning - so i've been looking into PCH.

I've had a few quotes and what i didn't realise was that with PCP you don't actually have to go through with the purchase and the monthly payments are a bit lower.

I'm assuming that if i went for PCP the monthly payments would be counted as an outgoing (same as PCH) but the lump sum due at the end of the term would be classed as a debt and would therefore go against the amount i could borrow?

jaydeeuk1

FlyingPasty wrote: »

Hi,

I'm after some advice on how each of the above would affect a mortgage application?

I'm a first time buyer and looking to apply for a mortgage at the end of the year (I will have cleared my credit card by then) so would have no actual debt. I've only been driving about 3 years and so far i've had 2 cars which have lasted less than a year each before ending on the scrap heap. My latest car has been in and out of the garage lately - its in again this morning - so i've been looking into PCH.

I've had a few quotes and what i didn't realise was that with PCP you don't actually have to go through with the purchase and the monthly payments are a bit lower.

I'm assuming that if i went for PCP the monthly payments would be counted as an outgoing (same as PCH) but the lump sum due at the end of the term would be classed as a debt and would therefore go against the amount i could borrow?

No, the lump sum isn't a debt as its an optional payment. You can hand the car back if you wish, in the unlikely event the car is worth less than the sum (usually a percentage is factored in to encourage you to trade up) r you can't afford the lump sum for no penalty. You can part ex it using the equity for something else, or you can try and sell it privately, and pay off the final sum and put the cash towards something else.