When you lease a car, you have a car for a certain period of time, usually 3 years. Throughout that period, you pay a fixed monthly sum. This monthly sum accounts for the depreciation cost of the vehicle rather than the value of the vehicle. For example, if the car is worth £20,000, and after 3 years, its value is £12,000, it’s depreciated by £8000. That is the total sum you will have to pay over the three years. With PCP on the other hand, you pay monthly instalments, and at the end of the contract, you can decide whether to give it back to the company, or to own the car. If you choose the latter, you have to make a balloon payment for the remainder of how much the car is worth.
Rhia explains, “PCP can be mis-sold or not explained properly to people. If customers want to keep their car, they have to increase their payment or pay off the final balloon payment… more people are hearing about leasing and realising they can get cars a lot cheaper per month with less stress. Cars are always losing money. If you put your life savings into a car it’s a bad investment because you won’t get your money back.”