Personal Contract Hire (PCH) vs Personal Contract Purchase (PCP)
Friday, 18. January 2019
I’ve already opened this week’s email with some of my views on the legal implications but aside from those PCH is definitely gaining traction. It took quite a while for consumers to get their heads around PCP with the idea of either handing their car back to the finance company, buying it or using it as a part exchange. With over 5 million live PCP contracts running it is clear that people are getting it.
However, of those who took out PCP’s on new cars, not willing to consider any other alternative because they still had the option to buy the car at the end of the lease if they wanted to, they then felt that they were misled by the dealer. They believed that there would be some equity in the car at the end of the agreement which could be used as part of the deposit on the replacement car. In many cases drivers have ended up giving back the car to the finance company because the car wasn’t worth the balloon payment let alone providing some equity.
In fact according to themoneysavingexpert.com 80% of those who take out a PCP hand the car back at the end of the agreement. So having had that experience they then realise that they could have saved a considerable amount of money by taking out PCH with no option to purchase. So whilst PCP looked great on paper it isn’t surprising that there has been a massive growth in PCH over the last 12 months whilst PCP has dropped for the first time ever.
I will be explaining much more over the coming weeks so watch this space as I reveal some of the closely held secrets of the industry. By Graham Hill
