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How to compare lease deals when you are on a budget

Last Updated: 26th Jul 2019
How to compare lease deals when you are on a budget

23rd July 2019

Budgeting. It’s basically balancing your expenses with your income. 

Your budget will determine how much you can afford in car running costs. And it’s crucial that you’re realistic about it. Overextending yourself can lead to problems later on – particularly if you have little or no savings and your income drops unexpectedly.

How do I work out my budget for leasing a car?

This simple Budget planner lets you work out within minutes how much you can afford to spend when buying a car. If you’re a shopping addict, or a frantic foodie, you can use the Quick cash finder to find out how much you’re spending, and could potentially save, at your favourite retail store or restaurant every year. But be warned - this may be a shock to your system.

Once you’ve got over the shock though, you’re then one step closer to the fun part - choosing your next car before your old one goes kaput.

Which type of lease deal will suit my lifestyle?

It doesn’t matter what type of driver you are - one who gets bored easily with an ‘out with the old in with the new!’ ethos, one who gets attached to their car and names it like a quarter of the UK population does, or one who puts 'looking good' above comfort, there will be a practical leasing solution for you with Hippo.

Before you sign on the dotted line, we’d recommend that you explore all of your leasing options, and we’ve outlined some of these below.

What are the main differences between leasing options?

 

Personal Contract Hire

Personal Contract Purchase (PCP)

Hire Purchase (HP)

Will I have to pay a deposit?

Yes. You will need to pay a deposit on the car and agree on a monthly payment before you drive away

No. The unique thing about Hippo Leasing is that you don't need to pay a deposit if you choose this option

No. The unique thing about Hippo Leasing is that you don't need to pay a deposit if you choose this option

How is the cost of the car calculated?

Fixed monthly payments are calculated based on the vehicle's expected decline in value between the date it was purchased price, and the end of the agreement (depreciation) 

Low monthly payments are decided depending on the value of the car. A minimum guaranteed future value (mgfv or balloon payment) is also calculated - see below

Low monthly payments are calculated based on the  cost of the car at the time, the size of your deposit and the number of instalments over 24-36 months 

Can I take ownership of the car at the end of its lease?

No. This is the key difference between Personal Contract Hire and Personal Contract Purchase

Yes. At the end of the lease, the gfv is what you’ll have to pay if you choose to take ownership of the vehicle. Or, you can hand it back to Hippo

Yes. Once you’ve met the full amount while and paid for the total cost of the car, you’ll own it

Can I part-exchange it for another car at the end of the lease?

No. Remember, you’re Hiring the car, so you’ll have to say your goodbyes and give it back

Yes. Since you’ve almost paid for the car, you’re within your rights to part-exchange it for a new model. If it’s worth more than the mgfv, you get the higher amount as a deposit toward your next car. If it’s worth less, you still get to keep the mgfv to put towards it

Yes. You’ll own the car at the end of the contract, and you’ll have the choice to keep the car, part exchange it and upgrade to another model, or pay a settlement fee to end the agreement early

What type of lease is best for me if I’m on a budget?

As already mentioned, it depends on what type of driver you are.

If you relate to Driver A B or C here, we pair you off with the lease deal for you, and give a couple of everday life examples to show why the others wouldn’t suit.

1. Driver A - The rover with no time! Someone who knows that they get itchy feet pushing the pedals of the same car after a while, but isn’t able to put the time aside to hunt down a new one once every few years.

You’ve put your vehicle through the car wash a countless amount of times, yet it still seems to have lost its sparkle, and you just can’t put your finger on why. Let’s weigh up your options for getting yourself out of this now stale motoring affair. 

If you’re certain that you’ll want to change the car after two or three years and you definitely don’t want to buy it, then Personal Contract Hire is best for you compared with other leasing options for a number of reasons.

Personal Contract Hire Vs. Personal Contract Purchase 

Both these options have a lot in common and are cheaper options than Hire Purchase (HP).

The only difference is that Personal Contract Hire MAKES you change your car once every two or three years; you don’t have a choice! But Hippo Leasing can help with finding the next car to add to your motoring memoirs. This can be beneficial for drivers who may tire of their car easily, but may not necessarily have the time to search for a new one.

Personal Contract Hire gives you that push to change your car for a new one, but you won’t have to go the process completely alone. On the other hand, Personal Contract Purchase gives you the option to buy the car, so you could be tempted to become complacent and keep the car until the inevitable happens -  you get fed up of it!

Driver A = Personal Contract Hire ✅

2. Driver B: The one who bonds with their car! Someone who forms an attachment to their car and finds it difficult to get comfortable behind the wheel of others, but can’t afford to buy the car outright.

If you’re a serial test driver and are notorious for taking a world tour around different dealerships, types of cars and brands, then you will probably be thankful for the day that you finally find one that you’re happy with and feel comfortable driving.

You've bonded!

Once you’ve found THE ONE, this surely means you’re in this long-term? And if you’re certain that you won’t change it anytime soon, Hire Purchase or Personal Contract Purchase could both be suitable and flexible options for you. You can count Personal Contract Hire out as you’ll have the car stolen away from you at the end of your contract.

Hire Purchase Vs. Personal Contract Purchase 

Hire Purchase (HP) lets you stretch your deposit out up to a maximum of nine months, and it lets you pay for the full cost of your car from 24 to 36 months. With Personal Contract Purchase, you will have to pay an amount which covers the depreciation of your vehicle in case you choose to hand the car back, which would be pointless if you’re resolute about keeping it!

Once all your payments have been met with Hire Purchase, you’ll own the vehicle and you’ll be responsible for part-exchanging it, selling it or of course holding onto it for the foreseeable future. 

Driver B = Hire Purchase ✅

3. Driver C: The ditherer! Someone who likes to have their cake and eat it because they can’t make up their mind about their car.

Indecisive? If the thought of 100% having to hand your car back at the end of the lease through Personal Contract Hire fills you with unease, you could opt for Personal Contract Purchase (PCP). This is extremely flexible in the sense that you can either say a fond farewell to your car at the end of your contract, or you can cash in the mgfv (balloon payment) to snatch it for yourself. 

Personal Contract Hire Vs. Personal Contract Purchase Vs. Hire Purchase

Technically, all options let you giveback the car if you decide at the last minute that you want to, but you can’t cut ties with a Hire Purchase (HP) agreement until you’ve paid off the entire loan, which usually lasts for a longer period of time compared to Personal Contract Purchase (PCP). 

With Personal Contract Hire, you MUST, even if through gritted teeth due to growing attached, watch your car be carted back to the Hippo garage. On the contrary, Personal Contract Purchase allows you to part-exchange your car and put the mgfv towards your deposit of it, take ownership of the car by paying the pre-calculated mgfv - so no extra surprise fees - or park the car with the leasing company.

PCP is more expensive than Hire Purchase (HP),but if you’ve got a track record of being a bit of a whirlwind when it comes to your motoring needs, it could be worth it for the extra wiggle room. 

Driver C= Personal Contract Purchase ✅

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