Personal contract hire (personal leasing)
PCPs remains a more popular way of getting into a new car, but leasing offers many of the same advantages and can actually work out cheaper...
With a personal contract hire (PCH) agreement, you effectively rent a car for an agreed period – usually two or three years. You pay a deposit followed by fixed monthly repayments, and it can be one of the cheapest ways to fund a car. However, unlike a PCP deal, there is no option to buy at the end of the contract; you simply hand the car back to the finance company and walk away.
These PCH lease agreements also involve an agreed mileage limit (usually around 10,000 a year) and although you don't own the vehicle, you are responsible for its upkeep and will be required to pay for any damage beyond fair wear and tear. Some lease agreements include servicing and maintenance costs, but they're not always as cost-effective as basic lease deals, so do your homework first.
Choose leasing if:
• You don't want to own the car
• You want to change your car frequently
• You want to fix the cost of motoring
• You want to drive a more expensive car than your budget would otherwise allow
• You don't want to be exposed to the cost of the cars depreciation
Watch out for:
• Cars with poor resale values, because these will increase your monthly repayments
• Early termination penalties; read the small print before you sign
• Unrealistic annual mileage limits, because you'll pay a penalty fee for each excess mile you rack up
• Penalties for damage. With this in mind, keep all service records, take photos of minor scuffs and get dents or scratches repaired. Its also a good idea to get the car inspected by the AA or RAC and to have it professionally cleaned
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