Car leasing is becoming a popular option in the UK not only for business owners but for individuals as well. It’s a smart choice for those who need a car to get around but are not too keen to own one nor make an expensive out of pocket deposit for a new vehicle.
Before availing of any personal car lease deals, you may want to take note of the information below.
There are three different options for long-term vehicle rentals available for individual users:
- Personal contract hire (PCH)
Buying a new car isn’t suitable for everyone, especially for those who believe they can invest their money somewhere else. Personal contract hire, or PCH, is a popular choice for individuals in the UK because it lets them ‘rent’ a car for an agreed period and then return it after the contract has ended. This way, there’s no depreciating value or car disposal to worry about.
When choosing PCH, you will be required to make an initial deposit, and there will be fixed monthly payments throughout the duration of the lease agreement. After the completion of the contract, all you need to do is return the vehicle, and you will be free to rent another car of your choice. If all is good, you can even request an extension of the lease.
- Personal contract purchase (PCP)
A personal contract purchase or PCP works roughly the same as PCH. The only difference is that the monthly repayment covers the depreciation cost of the vehicle. On completion of the contract, there will be an outstanding balance or balloon payment left. You can either pay it and own the car or choose not to pay it and return the vehicle to the finance company.
With PCP, there will be an agreement with the car value when the lease agreement ends, known as the MGFV or minimum guaranteed future value, or as mentioned before, the balloon payment.
It’s a popular option for individuals. The monthly payment covers any maintenance fees incurred while the contract is active. Plus, you will have the opportunity of owning the car after the long-term vehicle rental has ended or returning it to the finance company to get a new one.
- Personal lease purchase (PLP)
The PLP, on the other hand, is a car leasing option where it is dictated outright in the agreement that the car will be purchased after the contract is finished. It works for some people because at least they don’t have to come up with a significant amount of money to own a new car. However, you need to keep in mind that with this agreement, the monthly payments do not cover maintenance costs.
Driving a car is now made more affordable, all thanks to the car lease options available. It was only available to business owners before, but we’ve progressed so much that even individuals can avail of it now.