PCP vs Leasing: Which Vehicle Finance Option Is Right for You?

Not sure whether to go with PCP or leasing? Our guide compares Personal Contract Purchase and vehicle leasing side by side, helping you choose the right finance option for your next car.

Explore Our PCP vs Leasing Guide

When you're looking to drive a new vehicle without paying for it outright, two of the most popular finance options are PCP (Personal Contract Purchase) and Leasing (Personal Contract Hire).

Both offer lower monthly payments than traditional car loans and give you access to new vehicles, but they work in very different ways. In this guide, we compare PCP vs Leasing to help you make the right choice.

What Is PCP (Personal Contract Purchase)?

PCP is a flexible car finance agreement where you pay a deposit followed by monthly payments over a fixed term. At the end of the agreement, you have a choice:

Return the car
Pay a final "balloon" payment to keep it
Part-exchange it for a new vehicle

PCP gives you the option to own the vehicle but doesn't commit you to buying it.

What Is Vehicle Leasing (Personal Contract Hire)?

Leasing is a long-term vehicle rental. You choose a car, agree on the contract length and mileage, then make fixed monthly payments. At the end of the term, you simply return the vehicle.

There’s no option to buy the vehicle, but leasing is straightforward and often includes maintenance options.

PCP vs Leasing: Side-by-Side Comparison

Feature	PCP	Leasing (PCH)
Ownership Option	Yes – optional balloon payment	No – return only
Upfront Cost	Usually a deposit	Typically lower initial rental
Monthly Payments	Higher than leasing	Often lower and fixed
Mileage Limit	Yes	Yes
End-of-Term Options	Keep, return, or part-exchange	Return only
Depreciation Risk	Partially yours	Not your concern
Maintenance	Usually not included	Often included as an add-on
Flexibility	More flexible	Simple, fixed terms

Pros and Cons of PCP

Pros:

Option to own the vehicle at the end
Lower monthly payments than traditional finance
Good for those who may want to buy later

Cons:

Final balloon payment required to keep the car
You still bear some depreciation risk
May cost more over the full term if you buy the car

Pros and Cons of Leasing

Pros:

Lower monthly payments
Simple return process at the end
Ideal for driving new cars regularly
No concerns about depreciation or resale

Cons:

You’ll never own the car
Mileage and condition limits apply
Early termination fees may apply

Which Option Should You Choose?

Choose PCP if:

You want the option to own the car at the end
You're unsure whether to lease or buy
You may part-exchange in future

Choose Leasing if:

You want lower monthly payments
You prefer not to worry about resale
You like driving a new car every few years
Ownership isn’t important to you

Final Thoughts

Both PCP and Leasing offer flexible ways to drive a new car without a large upfront investment, but they serve different needs. If you're after long-term flexibility and the option to buy, PCP might suit you. If simplicity and lower monthly costs are more important, Leasing is likely the better fit.