Lease vs PCP: Which Is Cheaper?

Neither is cheaper in every case. A lease (personal contract hire) is usually the simpler way to drive a new car and hand it back, with no option to buy. PCP costs more if you pay the final payment to keep the car, but gives you that choice and any equity at the end. Compare the total cost of each over the same term.

Side-by-side comparison

Personal lease compared with PCP finance, feature by feature
FeatureLease (PCH)PCP
What the monthly payments coverUse of the car for the termThe car's expected loss in value, plus interest
Owning the carNo. There is normally no option to buyOnly if you pay the optional final payment
At the end of the termYou hand the car backYou hand it back, part exchange it, or pay the final payment and keep it
Upfront paymentAn initial rental, often a multiple of the monthly paymentA deposit, which you can usually choose within the lender's limits
Mileage and conditionSame for bothBoth set a mileage allowance and a condition standard. Charges apply if you hand the car back over the allowance or with damage beyond fair wear and tear.
Ending earlyAn early termination charge set by the contractVoluntary termination once half the Total Amount Payable has been paid on a regulated agreement, or settle the finance
Equity at the endNoneIf the car is worth more than the final payment, you can use the difference
Road taxUsually includedUsually paid by you
InsuranceSame for bothYou arrange and pay for it with either option.

Who each option suits

Lease (PCH)

Best forDrivers who want a new car every few years, fixed monthly payments, and no interest in owning the car or selling it later.

PCP

Best forDrivers who may want to keep the car, want the choice at the end, or want the right to end the agreement early once half has been paid.

Key takeaways

  • Compare the total cost over the same term, not the monthly payment.
  • The PCP total depends on whether you pay the final payment and what the car is then worth.
  • Both have mileage limits, so check the excess mileage charge before signing.
  • A PCP can usually be ended early through voluntary termination; a lease usually cannot without a charge.

Lease vs PCP Calculator

Enter your two quotes to compare the total cost of each over the same term.

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How to compare the cost

Put both options on the same term and add up everything you would pay:

  • Lease total: initial payment + monthly payment × number of months.
  • PCP total if you keep the car: deposit + monthly payment × number of months + optional final payment + fees.
  • PCP cost if you sell or part exchange at the end: the total above, minus what the car is worth at that point.

Here is the Lease vs PCP Calculator's worked example, with a £3,000 deposit and a 36-month term for both:

  • Lease at £350 a month: £3,000 + £350 × 36 = £15,600.
  • PCP at £300 a month with a £12,000 final payment, and a car expected to be worth £14,000 at the end: £3,000 + £300 × 36 + £12,000 − £14,000 = £11,800.

In this example PCP comes out £3,800 cheaper: £1,800 from the lower monthly payments and £2,000 from the car being expected to be worth more than the final payment. If the car were worth less than the final payment, you could hand it back instead, and the PCP would cost the deposit and monthly payments only (£13,800).

The resale value is an estimate, which is the main uncertainty on the PCP side. Excess mileage and damage charges, fees and insurance are not included in either total.

Which should you choose?

If you are certain you will hand the car back and want the simplest deal, a lease is often the more straightforward option. If you might want to keep the car, value the flexibility at the end, or want the right to hand it back early once half has been paid, PCP gives you more options.

What is car leasing? and What is PCP? explain each in more detail.

FAQs

Is leasing cheaper than PCP?
It depends on the quotes. MoneyHelper notes that leasing can often be cheaper than PCP or hire purchase, but you do not own anything at the end. Compare the total cost of each over the same term.
Can I buy the car at the end of a lease?
Not normally. A personal lease is a hire agreement with no option to buy. PCP gives you the option to buy by paying the final payment.
Can I end a lease or PCP early?
On a regulated PCP you can usually end the agreement through voluntary termination once half the Total Amount Payable has been paid, or by settling the finance. A lease usually has an early termination charge set by the contract.

Lease and PCP agreements differ, so check the quotes and agreements you are offered. This comparison is general guidance, not financial advice.

Sources and review

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