Is leasing better than PCP?

Tyler Heatley

27 Nov 2020

With so many ways to finance a new car, it can be hard to know which is best for you. PCP and leasing are amongst the leading means of buying a vehicle, but which is best?

There’s no two ways about it, new cars are expensive. Considering all of the technology, luxuries, safety and engineering involved in a modern car versus models of the past, you can start to understand why. Just like obtaining the latest smartphone, there are ways to pay monthly for your new pride and joy.

Two of the most popular ways to finance a car is leasing and PCP, but which is best for you?

Advantages of leasing

Leasing is a great option for those keen to change into a new car every couple of years. Having the reassurance that you’ve got a new model covered by a manufacturer warranty on the driveway – not to mention the latest gadgets – is a good position to be in. Leasing contracts can be a short as two years and the delivery times on cars are typically weeks and not months – in most situations you select from existing stock.

As you’re not keeping the car at the end of your contract, you just hand the keys back on the agreed date before being free to pick something totally different if you fancy. Think of leasing as a form of extended rental.

Advantages of PCP

PCP, or Personal Contract Purchase, sees you pay a monthly fee for an agreed period before making a final payment (balloon payment) at the end of the term to keep the car. This is a great way to buy the car you really want while making it much more viable than finding thousands of pounds.

As you’re ordering a brand-new car, you can specify exactly what trim and options it has. Like the look of that handsome blue on the advert? It’s yours if you want it, and the cost of such options is also broken up over the years of instalments. All of a sudden that £1,200 optional technology package you’re after is only £33 a month over three years.

Disadvantages of leasing

Sadly, if you become particularly attached to your leased car, you’ll be dreading the day it is handed back. Hopping from car to car is great, but you don’t have the option to keep it should it be the perfect fit for your driveway. Technically there’s nothing stopping you from simply ordering a new one, but if you want to leave the leasing game, you can’t take the car with you.

In most situations you’ll also have to pick from a preconfigured car when leasing. Often there will be a vehicle available that’s pretty close to your ideal specification, but you might have to choose between having the colour you want, or that premium audio system.

Disadvantages of PCP

The biggest drawback of PCP has to be the dreaded balloon payment. This is the outstanding balance after the specified number of years that needs clearing for you to keep the car. Many contracts allow you to trade the car in against this sum, but you’ll need to find the cash if you intend to retain the car you specified from day one.

Another disadvantage of PCP is leasing’s biggest strength. If you decide that you want something new two years into your PCP agreement that runs for four, you’re locked in. If you also end up with a car you hate – make sure you read our expert reviews – you’re also a bit stuck.

Which is best?

Ultimately that comes down to why you are buying a car. Do you want to have the latest thing every few years, or are you looking for a more financially viably way to buy the car you want to keep? PCP is currently the most favoured way of buying a new car, but leasing is growing in popularity.

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Tyler Heatley

27 Nov 2020