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All About Personal Car Leasing Options

Introduction to personal car leasing

Car leasing has become one of the most popular ways to upgrade a car in the UK. Cheap car leasing and finance are a fantastic way to get into a new or newer car than what you currently drive. Leasing dealers also regularly compete for the best car lease deals in the market so customers are spoilt for choice!

Leasing can often come with small deposit requirements but no deposit car leasing is the preferred route for most individuals when they consider they are handing the vehicle back.

We have offered some comprehensive information on the most popular finance and lease agreement types which we offer, their benefits and what the end of the term means for you.

Personal Contract Purchase (PCP)

What is a Personal Contract Purchase?

A Personal Contract Purchase, more commonly referred to as a PCP, is similar to a standard motor loan. You can be required to pay a deposit and monthly payments depending upon your agreement. You can also however, look at no deposit car finance and leasing as an option with some companies.

The difference, however, is that your monthly payments are lower than standard car finance as you have a large final sum or ‘balloon payment’ at the end of the term. The balloon payment is set by the finance provider as a guaranteed final value figure for your car should you not wish to keep possession. So, instead of spreading out the full value of a new car over a period of time you spread the value minus the balloon payment at the end.

What are my options when my Personal Contract Purchase ends?

1.Return your car - There will be no charge for this unless you’re over your agreed mileage and outside of the fair wear and tear standards.

2.Buy the car – This is where you will pay the final balloon payment, or guaranteed future value, figure and the car then legally becomes yours.

3.Part Exchange – You can part exchange your current lease car for a newer one. This can work out quite beneficial if you’ve maintained the vehicle well and remained within your mileage. If you part exchange your current vehicle then it may be worth more than the final balloon payment and therefore you’re free to add the extra value into your new deal.

What are the benefits of a Personal Contract Purchase?

  • Range Of Options - Plenty of options at the end of your agreement and towards the end.
  • Flexible Deposits - For example, Hippo Leasing offers no deposit car leasing which can be offered on a PCP agreement, if this is the most suitable route for you.
  • Fixed Monthly Payment – You know your payment up front and you know when your contract ends. Your payments don’t change throughout the agreement.
  • Lower Monthly Payments – You can drive a newer vehicle with cheaper monthly payments than a Hire Purchase or standard car finance.
  • No Depreciation Concerns – Cars depreciate very quickly. However, with a PCP you have a guaranteed future value, therefore the depreciation is not a concern.
  • Flexible Contract – Can be spread out up to 60 months.

Personal Contract Hire

What is a Personal Contract Hire?

This is one of the most common agreements when you want to lease a new car. Depreciation is a big worry for new car buyers and with a contract hire agreement, it is no longer your worry! You take control of a vehicle for a period of time on agreed monthly payments, usually with a more substantial deposit than a PCP agreement, and you make these payments until the end of the agreement. You are not the legal owner of the vehicle.

What are my options when my Personal Contract Hire ends?

1.Hand the vehicle back – providing you’re within your contracted mileage and the vehicles condition is within the fair wear and tear standards then you will face no further charges.

What are the benefits of a Personal Contract Hire?

  • Fixed Monthly Payments – Same as the above option you are contracted to a payment for the duration and this never changes.
  • No Depreciation Worries – A new car depreciates massively as soon as you get behind the wheel. With a contract hire, this is not your worry once you hand it back.
  • Deposits Can Be Negotiable – If you like the look of a lease deal but you can’t afford the deposit you can usually suggest that you can make an initial deposit of three monthly payment value deposit rather than six monthly payment value. 
  • Road Tax Included – Renewing and financing road tax is included in your deal as you’re not the registered owner of the vehicle.
  • Access To Better Cars – Similarly to a PCP deal you can make your budget stretch further on a contract hire.
  • Flexible Contract – Can be agreed to take place for up to 60 months.
  • Optional Maintenance – This is a package which includes servicing and MOT’s that ensure your vehicle stays within the agreed terms for maintenance.

Hire Purchase

What is a Hire Purchase?

A hire purchase is similar to a typical car loan. Payments contribute to the paying off the value of the car. As payments are being made however, the car is still legally the property of the finance provider. This is no different to car finance.

What are my options when my Hire Purchase ends?

1. Own The Car - When you sign for a Hire Purchase agreement you will be given details of a final payment figure. If you opt to pay this amount you will take legal ownership of the vehicle.

2. Upgrade - Part Exchange the vehicle for a newer vehicle on a lease or similar finance product.

What are the benefits of a Hire Purchase?

  • Asset -You are paying towards owning a vehicle.
  • Pay It Off Early - If you manage to save some money and you are able, you can opt for an Early Settlement. This can save you some money on the overall figure paid for the car as you are likely to reduce your interest.
  • Fixed Monthly Costs - You have a fixed monthly cost for the duration of the agreement.
  • Affordable Final Payment - The final figure is a simple transfer of ownership fee that is usually affordable and you know it in advance.
  • Poor Credit Friendly - Good way to get into a newer vehicle if you have poor credit looking to lease initially.
  • No additional charges for mileage or damage - These will obviously affect the vehicle's value though when you come to sell.

Lease Purchase

What is a Lease Purchase?

Simply put a Lease Purchase is the same concept as a PCP agreement. The leasing company provides a retail value of the car and the same process of a future value is applied to the agreement. The balloon payment at the end of the agreement though is not optional and can be made through cash payment, further finance or part exchanging the vehicle and paying it off. There is no guaranteed future value when you first get the vehicle, so the value of the car will depend upon depreciation and the overall condition of the vehicle.

What are my options when my Lease Purchase ends?

1. Own The Vehicle - A lease purchase is an agreement whereby you have agreed to take ownership of the vehicle. This means the balloon payment and ownership is your only real option.

2. Part Exchange - You can part ex your lease car, pay off the balloon figure and then lease a newer vehicle if you wish.

What are the benefits of a Lease Purchase?

  • Lower Monthly Payments – Typically cheaper monthly payments than if you opted for a Hire Purchase.
  • Own The Vehicle – Once you’ve made your monthly payments and balloon payment you then own the vehicle.
  • Flexible Contract – Can be spread out up to 60 months.
  • Early Settlement – You can settle your agreement early and pay off outstanding payments.

For more information about car leasing you can visit our FAQ page

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