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Should I Get PCP or a Car Lease?

If you can’t decide yet whether to get a car finance PCP or lease a car, don’t worry because we’ve prepared this article to help you arrive at a sound decision. Get to know the pros and cons of PCP car finance and car leasing while also learning their similarities and differences. Let’s dive right in!

Car Lease vs Finance UK

For both Personal Contract Purchase car finance and car leasing, the monthly payments are more affordable compared to financing a car with a bank loan or with Hire Purchase. Since HP and bank loan repayments cover the full cost of the vehicle, you can expect to pay higher monthly instalments. For PCP and car lease, however, your payments go toward only a portion of the car’s price. 

If you’re looking for affordability, (it's worth checking out the cost on a car lease finance calculator UK) PCP car finance or car leasing are better options compared to other types of car financing products. But you do have to bear in mind that these two work differently than HP and bank loans. For example, when your contract ends, you won’t be the owner of the car. With PCP, you have the option to buy the car by paying the final balloon payment. This option is not available for car leasing though. 

What is Car Leasing?

A car lease works just like a car rental but for a long-term contract. You first have to choose which car you want to drive and then determine how long you want to have it. Many drivers who choose to lease a car have contracts of two to four years. Along with this, you’d also have to determine your expected annual mileage because it’s among the factors that the car leasing company consider when calculating your monthly payments. 

Before you can drive the car home, you first need to pay a deposit upfront and then throughout your car lease contract, you have to make payments every month. While you are the one driving the car, remember that the ownership of the vehicle is retained by the car leasing company. When your contract ends, you have to hand back the car to them. 

You might be wondering can you switch a car lease to finance? If you’re interested in buying the car, you may ask the car leasing company about it. However, know that they may or may not sell the car to you. It would be a different kind of agreement altogether. But it wouldn’t hurt to ask so go ahead and shoot the question if you’re really keen on buying the leased car. 

When leasing a car, even if you are not the owner of the vehicle, you still have to take good care of it. The car leasing company will assess the vehicle to see if there is any damage beyond fair wear and tear. If they find that the car is in bad shape or if it has exceeded the agreed annual mileage, then you can expect to pay penalty charges. 

What is PCP Car Finance?

In many ways, PCP is similar to a car lease but they work very differently as well. With PCP car finance, you will be borrowing the full value of the vehicle and paying interest on the remaining balance. In most cases, you also have to put down a deposit although so some car finance companies offer zero-deposit deals, too. 

While you’re using the car, you have to make monthly payments that go toward the value that the car is expected to lose throughout your PCP agreement plus you also have to pay interest.

Since you’re only paying for the expected depreciation of the car, this makes the monthly repayment amount much more affordable compared to Hire Purchase car finance where your payments cover the full value of the vehicle.

There is a catch though because, at the end of your PCP contract, the car will not be yours automatically. Instead, you have to pay the final balloon payment to own the vehicle. 

But what if you don’t want to pay the balloon payment? That’s alright because you have two other options to choose from. You may simply return the car and not pay anything else. You have to make sure the car’s in good condition though, otherwise, you might have to pay penalty charges.

The other option is to use the remaining equity of the car as a deposit for a new car on another PCP car finance agreement. This is a good way to upgrade your ride without a lot of hassle. 

Car Lease vs. Finance UK: How to Choose?

New or Used Car Options

Car leasing is usually only available for new cars. If you want to save money, choose a second-hand car on PCP finance because this car finance product is available for both brand new and used vehicles. 

Availability for Bad Credit

Most car leasing companies require good credit scores from drivers who want to lease a car. PCP car finance is typically available for borrowers even if they have bad credit. The interest applied might be higher though but there are car finance companies that specialise in providing car financing for borrowers with poor credit. 

Annual Mileage Limit

Both PCP and car leasing have annual mileage limits. Be sure to stick to the agreed limit to avoid paying penalty charges. Also, see to it that you keep the car in good working condition throughout the time that you are using it. 

Option to Buy

Leased cars have to be returned to the car leasing company. While you may ask about buying it, there is no guarantee that the company will sell the car to you. With PCP car finance, you have the option to buy the car by paying the final balloon payment. 


Now that you know the difference between PCP car finance and car lease, you’ll be able to choose better which one is most suited to your needs and budget. If you will only be using the car for a few years and have no plans of owning it, then a car lease might be for you. But if you want the flexibility of having a few options when your contract ends, you can consider getting PCP car finance instead. Either way you will find both more affordable options in terms of monthly payments. 

We’d love to hear your thoughts on this article!