Need urgent help. Pcp vs lease purchase

manuryan11

I’ve done a bit of Googling but still confused.

Can somebody tell me the difference between pcp and lease purchase from what I understand

Pcp has the monthly payments and a final  balloon payment  with 3 options at the end:

-hand the car park at the end and walk away

-sell the car and pay off the balloon payment and any positive equity used towards deposit of new car.

-pay off the balloon payment and keep the car 

Now what is lease purchase? From what I understand it’s pcp but with no option to hand the car back and walk away. You had to pay the final balloon payment.  

I ask because I thought I was getting a pcp deal through an online broker but turns out I’ve actually just done a hard search for a lease purchase instead. I need to sort the finance for the car oday as I’ve put a deposit down at the dealership but told them I’d sort my own finance as the deals they offers weren’t great . If I have no intentions of handing the car back at the end, does it really back a difference?

Also on lease purchase can I sell the car to another dealer at the end to pay off the balloon payment? What if the Car is worth less than the ballon.

Have I messed up thinking I was getting a pcp but instead have a lease purchase.

DrEskimo

Do you have the exact wording of what you have been offered? Lease purchase isn’t anything I’ve heard of, and is in fact a contradiction in terms. 

PCP = a secured finance agreement.
Lease = a hire agreement where you pay a fixed amount and hand the car back at the end. 

If your intention is to simply buy a car and have no intention of handing back then neither option is a good one. Look at unsecured personal loans, or better yet, get a cheaper car with cash. 

molerat

https://www.evanshalshaw.com/finance/lease-purchase/

https://www.buyacar.co.uk/car-finance/336/what-is-lease-purchase

Another name for conditional sale, obviously sounds better.

DrEskimo

molerat said:

https://www.evanshalshaw.com/finance/lease-purchase/

https://www.buyacar.co.uk/car-finance/336/what-is-lease-purchase

Another name for conditional sale, obviously sounds better.

Ah....so basically it's structured like a PCP with a final payment so you pay more interest, but with none of the benefits of a PCP such as a guaranteed future value or ability to VT  (although I think the 'benefits' of a PCP are generally grossly exaggerated).

MrFrugalFever

Hi,

lease purchase -
 • A Lease Purchase is similar to a  Hire Purchase or Conditional Sale agreement except that payments are structured like a lease agreement where the customer makes a number of payments in advance rather than a deposit.

•   A balloon payment can also  be incorporated into an agreement, which represents the future residual value of the vehicle.

• As it is a purchase plan, the payments do not attract VAT and the customer can take title/ownership of the vehicle at the end of the agreement.

• Lease Purchase agreements can be regulated, exempt and unregulated under the consumer credit regulation depending on the type of customer and the amout of credit.


Personal contract purchase -

• PCP is  a very  popular  and flexible  way  of purchasing a vehicle.

•  Like a Hire Purchase agreement, title to the vehicle under a PCP agreement is kept by the lender until everything is paid off.

• It allows the customer to know the ‘least amount’ the car will be worth at the end of the agreement (the Guaranteed Minimum Future Value or GMFV)

• It requires the customer to agree a mileage allowance based on their expected usage which affects the GMFV. The higher the allowance is set to the more miles the customer is expected to drive, which serves to lower the GMFV and increase the size of the monthly payment.

• If the vehicle is worth less than the GMFV at the end of the agreement (assuming it has been kept in good condition and hasn’t exceeded the agreed mileage), the customer can simply hand the vehicle back with nothing more to pay.

• PCP offers customers flexible options at the end of the agreement

• Agreements can be regulated, exempt or unregulated under consumer credit legislation. This all depends on the type of customer and the amount borrowed.

Hope this helps

Farmingtons

I am only throwing this out there as it has the word "lease" in it, but I have a straightforward lease contract and my name is never recorded on the V5 nor do I ever see it, the owner is the company who is leasing it to me.  So obviously if you never own the car, there's not a lot you can do with regard to moving it on. 

Like the old Billy Connolly joke about when the new money started moving into Glasgow and all the new folk were in the boozer talking about how much they'd made on their houses.  One of them starts talking to an old boy, oblivious to the fact he has a council gaff, and says "What do you think you would get if you sold your house?" - "About 18 months with good behaviour".

Also on a lease, road tax will probably be part of the deal (at the current prices) and you will not pay it each year, but may be asked to pay the amount by which it has increased since the contract was signed.

You are also somewhat locked in to a lease whereas you can reach a voluntary termination stage on a PCP.

Aside from the fact that you have already mentioned than an option to buy it outright at the end is not your right (although it may be granted on request), there isn't a lot more that differentiates the two.  Up until recently, before matters such as chip scarcity and the old pandemic hit things, you could pick up very good lease deals as the market was the product of over-supply - so if you didn't have an exact spec or colour in mind, you could pick up good deal on something nobody else wanted, but lease bargains as they were seem a bit of a rare thing now.

Farmingtons

Farmingtons said:

I am only throwing this out there as it has the word "lease" in it, but I have a straightforward lease contract and my name is never recorded on the V5 nor do I ever see it, the owner is the company who is leasing it to me.  So obviously if you never own the car, there's not a lot you can do with regard to moving it on. 

Like the old Billy Connolly joke about when the new money started moving into Glasgow and all the new folk were in the boozer talking about how much they'd made on their houses.  One of them starts talking to an old boy, oblivious to the fact he has a council gaff, and says "What do you think you would get if you sold your house?" - "About 18 months with good behaviour".

Also on a lease, road tax will probably be part of the deal (at the current prices) and you will not pay it each year, but may be asked to pay the amount by which it has increased since the contract was signed.

You are also somewhat locked in to a lease whereas you can reach a voluntary termination stage on a PCP.

Aside from the fact that you have already mentioned than an option to buy it outright at the end is not your right (although it may be granted on request), there isn't a lot more that differentiates the two.  Up until recently, before matters such as chip scarcity and the old pandemic hit things, you could pick up very good lease deals as the market was the product of over-supply - so if you didn't have an exact spec or colour in mind, you could pick up good deal on something nobody else wanted, but lease bargains as they were seem a bit of a rare thing now.

Oh, one other thing.  Not seen it with my own eyes, but have heard of lease companies stressing that services during the lease period must be carried out by franchise dealers and not Hellfrauds or their ilk.  Although on a reasonably pricey new bit of kit, I'd be happier at the main dealer anyway.

DCFC79

OP you get this sorted ?