Owning a vehicle is advantageous but for some who usually change their model or for those who do not have enough money to purchase a vehicle, car leasing is simply the answer. It has various advantages like you don't have to worry about resale value when you want to get another model and you don't have to spend a lot of cash in an instant.
Although this is highly beneficial, it has also it drawback-the vehicle is not yours! As an answer to the problem, the Personal Contract Purchase was made in which you can take advantage of car leasing and you will have the opportunity to own the vehicle if in case you change your mind.
The Personal Contract Purchase which is also known as PCP is particularly created for private individual. This is the most popular method of funding a vehicle. It is categorized as a provisional sale agreement that provides protection under the Consumer Credit Act 1974 as well as the Financial Services Regulations 2004.
This kind of agreement gives an alternative to set up a contract term, with monthly payments. When the term expires, there is an option whether one will pay the remaining payment in order to own the vehicle. The amount to be paid will base upon the outset. However, if the first is not an option, the car can just be returned to the leasing company and you can look at a new contract or other methods of funding a new vehicle if your circumstances have changed.
The Personal Contract Purchase has a lot of benefits. The monthly payment is set so you can budget your bills beforehand and the amount to be paid is typically lower than other forms of finance. The initial payment is also low and you can refinance the payment at the end of the term if you wish to.
Road tax will normally be included in your payment for the first years and if maintenance of the vehicle is included, you will have to pay it for the life of the contract. If you go for PCP with maintenance included, you don't have to worry about repair and maintenance service because it is already included. But there are few disadvantages to this kind of agreement like it can be extremely costly compared to hire purchase agreement and you will also have to worry about car insurance.
Moreover, another option to take is the Personal Contract Hire (PCH) that provides the user a fixed monthly rental for fixed period. But unlike Personal Contract Purchase which you will have options to take at the end of the contract, in this kind you simply need to hand it back to the leasing company.
This method is well accepted by company car drivers who are given car allowance instead of providing them with company vehicle. As a general rule, it is highly important that you know how payment will be computed. Basically, the personal contract hire company will determine the ‘residual value' of the vehicle.
For you to guesstimate the value the company will request you to stick to a certain mileage limit in driving and when you exceed the limit, you will be penalized at the end of the term. Now, if you drive a lot then the Personal Contract Hire may not be good for you since you will only suffer high monthly payment in the end if you go over the contracted mileage agreement.
But since this offers a fixed monthly payment then you will benefit of driving different models of vehicles after every few years. And so before deciding whether you will go for Personal Contract Purchase or for Personal Contract Hire, you need to examine first your lifestyle.
Written on behalf of Total Fleet Services by John Eva
Personal Contract Purchase Cars - Personal Contract Hire Car