A good friend of mine got a new Mini Cooper S recently — a lovely car in the launch colour, Volcanic Orange.
‘Did you lease it?’
‘Yeah’ he said.
Like many people he doesn’t understand leasing and I knew the car wasn’t leased so I quizzed him further.
‘Have you got a balloon payment?’
‘Yeah’ he said.
‘That’s a PCP, mate.’
I explained to him the main differences:
PCP — Personal Contract Purchase
· The second ‘P’ kinda gives it away — you’ve bought the car. The V5 is in your name and you’ve taken out finance secured against the car.
· You can sell the car any time during the finance contract — there’s no tie in. You’ll often pay a 1 month interest penalty to exit.
· You’ll have a guaranteed future value on the car so at the end of the contract you can either a) hand it back, b) pay the large final payment and keep the car or c) sell it and pay off the finance — if, for example, you owe less than what the car is worth.
· You pay the annual road tax on the car.
· More often than not, throughout the term of the contract you are in negative equity, meaning if you want to sell the car, the outstanding finance balance is more than the value of the car.
Lease
· You’re renting the car. You pay ‘rental’ lease payments and hand the car back.
· You have no risk when it comes to the value of the car as you’ll never sell it as you don’t own it.
· The road tax is included in the cost of the lease! Yay.
· You won’t get a V5 through the post as you don’t own the car.
And then like any good friend would, I told him he was an idiot for not leasing ??