Leasing vs PCP: Which is Better?
These days there are several different financing options when you’re choosing a new car, and it’s not just a decision between buying outright or leasing. While regular Personal Operating Leases remain a sensible choice, Personal Contract Purchase (PCP) is also a popular financing alternative. So, when it comes to leasing and PCP, which is better?
A standard leasing contract, such as a personal operating lease, is one of the most straight-forward financing options available. Once you have agreed on the terms with your dealer, most leases consist of monthly payments on your vehicle for a fixed period of time.
Leases are so popular in part because of their flexibility, and not just in the model you choose: financing and lease conditions can be customised when you agree on a contract, depending on your requirements. For example, there are options when it comes to the initial deposit, monthly payments, contract length, and mileage limits.
The main thing that sets standard leases apart is that there is less long-term commitment compared to other options. Once you have completed your contract, you are free to change models or switch to a different method of funding, without the hassle of trying to sell your vehicle. However, it is worth noting that there can still be significant costs associated with ending a contract early, if you are even allowed to end the contract prematurely at all.
Of course, with a lease you’ll have to hand the vehicle back at the end of your contract (assuming you don’t renew it). Despite this, cars can be considerably more economical to lease compared to purchasing outright, especially for vehicles (e.g. Mercedes-Benz models) that have a relatively low rate of depreciation.
Personal Contract Purchase (PCP)
PCP contracts are very similar to standard leases, but the critical difference is that you have the option to purchase the vehicle at the end of the contract, for a price based on factors including interest and what you have already paid- this is known as a balloon payment.
This means PCP can be a good option if you want to decide at a later stage whether you want to own your vehicle, or if you just want to delay the full payment. It’s worth noting that any given lease or PCP will not be exactly the same, particularly when it comes to the initial deposit and monthly payments. For example, in many cases a PCP contract may work out more expensive overall than a similar lease due to interest charges and having the privilege of deferring your decision the purchase the car until the end of the contract.
Which is Better?
Both leasing and PCP are good options, but which is better depends on your personal circumstances and what you think your requirements will be in the future.
If you know that you’ll only require a vehicle for a set period of time, then a lease is probably the most suitable option. Likewise, leasing is ideal if you want to upgrade your model or switch to something completely different at the end of your contract. In contrast, if you think you might want to own the car at the end of your contract but you don’t want to buy it outright, then PCP is the logical choice.
Hopefully you now have a better idea of what the best financing option is for you. At City Vehicle Leasing we offer several financing options on our Mercedes-Benz models, for both personal and business use, including leasing and PCP. For more information about any of our options, contact our experts today.