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Thinking about personal car leasing? It's a massive decision and sometimes it just seems like a world full of confusing terms.

Don't worry - with over 15 years experience, Rivervale Leasing have all the answers and now so can you!

Personal Contract Hire (PCH)

With PCH you enter into a contract with a Finance Company.  You get full use of the vehicle for a contracted period of time.  You don't own the vehicle, it remains the property of the Finance Company and you pay the finance company a monthly fee to use it.

The monthly fee is based on the value of the vehicle, contract length and residual value (calculated by expected depreciation and vehicle mileage) at the end of the contract.  There will be a mileage limit set out in your leasing contract.

Personal Contract Hire (PCH)

BENEFITS  CONSIDERATIONS
Drive a new vehicle that would be too expensive to buy outright  You never own the vehicle
A fixed monthly price allows for easier budgeting Exceeding your mileage limit will incur extra cost 
Maintenance options available - avoid unexpected motoring costs You must use fully comprehensive insurance 
Vehicle road tax will be included in your monthly fee There is no option to buy your vehicle at the end of your lease 
No worries over depreciation or re-sale of the vehicle Changes to VAT will affect your monthly payment 
usually only a small initial outlay at the beginning of your lease Wear and tear outside of the 'Fair Wear and Tear Guide' will lead to extra cost at the end of your lease 
Flexibility - tailor your lease to your lifestyle, choose a contract length and mileage specific to you It can be expensive to terminate your contract early 

Personal Contract Purchase (PCP)

PCP gives you the option to buy the vehicle at the end of your contract.  You enter into a contract with a finance company relating to your chosen vehicle and at the beginning the 'minimum Guaranteed Future Value' of the vehicle will be agreed upon.  This value reflects how much the vehicle will be worth at the end of the contract period.  It will depend upon various factors such as length of contract and mileage.

At the end of your contract the monthly payments made will not be sufficient to cover the entire cost of the vehicle so there will be a lump sum left to pay called the 'balloon payment'.  This payment will be calculated considering the agreed upon 'Minimum Guaranteed Future Value', total of monthly payments made and the condition of the vehicle at the end of the contract.  You can choose not to pay it and return the vehicle.

Personal Contract Purchase (PCP)

 BENEFITSCONSIDERATIONS 
 Drive a new vehicle that would be too expensive to buy outrightExceeding your mileage limit will incur extra cost
A fixed monthly price allows for easier budgeting You must use comprehensive insurance 
Maintenance options available - avoid unexpected motoring costs Wear and tear outside of the 'Fair Wear and Tear Guidelines' will lead to extra cost at the end of your lease 
Usually only a small initial outlay at the beginning of your lease It can be expensive to terminate your contract early 
Flexibility - tailor your lease to your lifestyle, choose a contract length and mileage specific to you Road Fund Licence paid for separately  - not included in monthly payments as it is for other lease types 
The vehicle resale value is agreed at the beginning of the contract so no risk of negative equity You do not own your vehicle until after the balloon payment is made at the end of the contract 
Buy your vehicle at the end of the contract, or hand back  

Personal Hire Purchase (PHP) / lease Purchase (LP)

With PHP, you enter into a contract with a finance company.  Here the finance company purchases the vehicle, then allows you to use it while you pay monthly instalments over a contracted length of time to cover the total value of the vehicle.  Usually an initial deposit of higher value than the agreed monthly payment will be required.  After this contracted time the vehicle will be owned by you.

The total of monthly payments will be decided when considering the value of the vehicle at new, the length of the contract and the initial deposit made.  To reduce monthly payments a larger balloon payment may be negotiated to be paid at the end of the contract.

Personal Hire Purchase (PHP) / lease Purchase (LP)

 BENEFITSCONSIDERATIONS 
 Drive a new vehicle that would be too expensive to buy outright You only own the vehicle once you've made the final payment
A fixed monthly price allows for easier budgeting If you do not keep up with the repayments the finance company can repossess your vehicle 
You own your vehicle at the end of the contract The finance on your vehicle must be settled before you can resell your vehicle 
Flexible contract lengths to suit your financial position No option to hand back your vehicle - the balloon payment must be made at the end of the contract 

See also:

View the guide as an interactive slideshare presentation below and/or download it as a pdf.

Rivervale Partners

Arval logo Key associate of Lex Autolease - the UK's leading Fleet Management & Fleet Funding Specialist Alphabet leasing logo BVLRA logo - the trade body for the leasing sector Brighton and Hove FC logo Network Leaseplan logo Sussex Cricket Logo
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