Personal Car Leasing: What you need to know and what type of finance is best for you

Leasing, when it comes to cars, is a phrase thrown around a lot. Paying monthly for a car and handing it back at the end is a common definition given. But there’s a little bit more to it than that. 

Whether you’re looking for your first car or want a little bit more information, you’ll find everything you need to know here. First off, the basics. 

What Is Car Leasing? 

Car leasing is where you make monthly payments and in return get to drive the car you want. There are a few different ways you can lease a car. Paying monthly and handing the car back at the end is one of them. It’s called Personal Contract Hire; or PCH. 

Personal Contract Hire (PCH)

As already touched on, PCH is where you make payments each month and at the end, you hand the car back. 

First, you choose your car, and before taking the vehicle, you agree a deposit amount – if you want to include one in your agreement – work out how many miles a year you’ll drive and for how long you want the car. From all that, you’ll be given a monthly payment.

Audi A3

You’ll then pay your deposit – if you want to make one – and take delivery of your new vehicle. Then, you pay the pre-agreed amount each month until the end of your contract. 

When that time comes, you hand the car back. It’s really important to note, however, that if you don’t look after the vehicle, or drive more miles than you initially said you were going to, you will likely face additional charges. 

Personal Contract Purchase (PCP)

Another leasing option is a Personal Contract Purchase. Much like a PCH, you find your vehicle, agree a deposit amount, work out how many miles a year you’ll drive and the term of your contract. 

BMW 318d

Again, you take delivery and make monthly payments until the end of your contract. But the end, unlike a PCH where you have to give the car back, you have three options.

Option 1: Keep The Vehicle

If you choose, you can pay the final ‘balloon’ payment and keep the vehicle. Once everything is paid off, you become the outright owner. 

Option 2: Part Exchange

Your second option is part exchanging your car. Although you don’t own the vehicle, you can still take advantage of its value. 

The vehicle’s worth will be put up against the outstanding finance, and if there’s any equity in the car – i.e. if the car’s worth more than the outstanding finance – you can use that as a deposit on a new one. 

Option 3: Hand The Car Back

As with a PCH, you do have the option to hand the car back at the end with a PCP. If you choose to, it’s important to note you’ll face the same terms and conditions as a Personal Contract Hire agreement. 

Hire Purchase (HP)

Hire Purchase is another type of leasing. Unlike PCH and PCP, you make your monthly payments and at the end, you own the vehicle outright – without a balloon payment.  

Hyundia IX35

There’s no need to consider mileage, as it’s not part of a HP contract. 

With a HP, as you’re paying for the full vehicle, you’ll often find that the monthly payments are higher than that of a PCH or PCP. 

Which Leasing Option Is Right For You? 

Which option is right for you depends on what you want and your circumstances. If you don’t want to keep the vehicle, a PCH or PCP may be best

PCH and PCP agreements certainly give you more flexibility than HP, as you can change your car more frequently. 

However, if you do a lot of miles, a PCH or HP may be the one for you. 

Skoda Citigo

The best way to find out which leasing plan would suit your circumstances is by speaking to an expert. 

Here at Zero, we specialise in zero deposit car leasing, and have a team of account managers who are experts in car finance. After a quick chat over the phone, they’ll be able to give you advice based on what’s best for you and your circumstances. 

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