In a car leasing survey commissioned by WhatCar? 37% of respondents said they changed their car more frequently now than they did a decade ago.
One of the factors cited by 22% of respondents as a motivator for this, was ‘generous finance offers.’
The survey then questioned if motorists were being financially stretched when the low payment term ended and the balloon payment was due.
With Personal Contract Hire there is no balloon payment – this is only an option with Personal Contract Purchase.
Confused?
We thought some of you might be so below is our no-nonsense explanation of exactly what Personal Contract Hire and Personal Contract Purchase are.
Personal Contract Hire
Personal contract hire is a type of car leasing for individuals. It consists of an upfront payment followed by regular, fixed, monthly payments over a set period of time.
At the end of your personal contract hire period (usually 2 or 3 years) you simply hand the car back. You do not have to make any final payments and you can choose to lease another vehicle or not.
Read our ‘top ten benefits of car leasing' blog to find out more.
What is Personal Contract Purchase?
Personal contract purchase is a loan, helping you to purchase a car. Unlike a normal personal loan however, you won’t be paying off the full value of the car over the agreed term. Instead you will pay an agreed monthly amount and then at the end of the term agreed, if you want to own the car, you will make a balloon payment. This payment will be agreed when your PCP is taken out and you will know exactly when this is due.
You don’t have to pay this, as you get a choice of what to do at the end of the deal. But it is the sum you’ll pay if you want to keep the car.
Four out of five people with a PCP deal don’t actually buy the car at the end of agreed period (Source: the Finance and Leasing Association) and therefore it may be that leasing is a financially better option for you as the monthly payments are generally cheaper.
Choosing to enter a finance agreement of any kind should never be taken lightly and our team of car leasing and finance experts are always on hand to discuss options with you – get in touch today if you’d like to find out more via email: sales@littlegreencarleasing.com or call 01491 615514
Happy Motoring!