PCP vs PCH – What’s The Difference? 

Today, the appeal to purchase a new car outrightly has dropped massively. 

Why? 

Many people prefer to save money and opt for cheaper alternatives that allow them to make monthly payments. 

While there are a few notable alternatives, the most popular options include Personal Contract Purchase (PCP) and Personal Contract Hire (PCH). 

This piece will look at the differences between these car purchase options. 

What Are The Differences Between PCP and PCH? 

Let’s say you’re interested in comparing Mini leases online; you’ll most likely come across PCPs and PCHs on several service providers. Before going ahead with any of these alternatives, learning what each means and their key differences would make plenty of sense. 

The first thing to look at is the definition of both terms. 

A Personal Contract Purchase (PCP) allows you to purchase the motor vehicle at the end of the lease contract. However, a Personal Contract Hire (PCH) is a long-term hire, and you’ll be asked to return the vehicle at the end of the contract. A PCH can also be called a car leasing contract. 

To understand the differences between PCP and PCH, you’ll need to compare them under the following parameters; 

  • Cost and Contract Fees
  • Contract Flexibility
  • Car Maintenance 
  • Choice of car
  1. Cost and Contract Fees

In most cases, the long-term cost of PCP contracts is higher than PCH. 

Why? 

You’ll be subject to more deposits and a higher balloon payment. The balloon payment refers to a large final payment due at the end of the contract. 

You’d do well to note that the total value of deals varies between service providers. Therefore, you may need to check different service providers to determine the amount of cost that would be suitable for you. Don’t forget to include running costs in your budgets, such as fuel and insurance. 

Whether you’ll be applying for a PCP or PCH agreement to get your next car, it’s essential to keep in mind that you’ll need to make an initial payment deposit. For PCP, the deposit size is usually 10% of the car’s price. However, the PCH initial payment is equal to the sum of the lease payment for six months. 

Also, the monthly payments for PCH are meant to cover the difference between the car’s original purchase and its value at the end of the contract. Furthermore, the monthly payments of PCH will be fixed for a specific duration and number of miles. 

When you opt for a Personal Contract Purchase, you’ll be subject to a final balloon payment. There may also be a purchase fee. On the other hand, a Personal Contract Hire does not require a final balloon payment. You’ll only be subject to additional fees if you damage the car or exceed the mileage agreement. 

  1. Contract Flexibility

When signing up for a PCP or PCH, you must be prepared for strict terms and conditions. You must go through all the contract details before you sign a final agreement. Some service providers may allow you to negotiate the terms of your contract, including add-ons. 

A typical PCP contract will run between 2 – 4 years, after which you’ll have to buy, return or part-exchange the vehicle. However, a typical PCH contract will run between 2 – 5 years, after which you’ll return the car. Lessees are allowed to extend the duration of the lease agreement to suit them. 

  1. Car Maintenance 

In a PCP agreement, the lessee will bear the cost of servicing their vehicles at car dealer services specified by the lessor. This way, the lessor can ensure that the best hands maintain their vehicle. Failure to service your vehicle regularly or using an unaccredited repair service will result in a fine. 

When you opt for a Personal Contract Hire, you can include a maintenance package in your agreement. The value of the maintenance package will be added to your monthly payments and determined by the leasing firm. There may be various maintenance coverages designed to handle different types of repair. 

  1. Choice Of Car

While PCP offers lessees a respectable number of car options, PCH takes things even further. You can access more low-budget and luxury car alternatives after completing and signing the PCH agreement.  

Conclusion

That’s all on the differences between PCP vs PCH. This piece reviews the differences between these two car purchase agreements using different parameters. If you plan to get a PCP or PCH soon, you can compare these differences to determine which is more suitable. 

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