PCP vs Traditional Lease

[Ashaar Mohamed]

Can you please explain what is the difference between PCP and traditional lease. And is there any cons/risk on PCP compare to lease.

[Gummybr]

PCP (personal contract plan) works in a different way to the normal lease as follows.

You make a down payment for the vehicle you wish to buy and pay the rest as installments with a condition where the purchaser can pay a bulk payment after the rental period and take the vehicle away or give the vehicle back to the vendor. In this instance the vehicle should be under the vendor / PCP provider name. For the vendor to take back the vehicle the user should have driven the vehicle as per the terms and conditions laid out in the contract (very much similar to a hire purchase).

In a lease you again pay and upfront payment for the vehicle and then lease put the balance in equal payments monthly for a pre determined period of time. In this case the vehicle will be under the purchaser but with absolute ownership under the leasing company / bank.

PCP is a very popular mode of purchase in Europe where people can change the vehicles every two / three years. The dealers themselves provide the facilities through their banks (You have MB Financing and BMW Financing set up differently)

In Sri Lanka there is a company that does a similar offer on Park Road. Here you have to pay 20% of the vehicle value upfront and lease 30% for a period of two years and then pay the balance 50% at the end of the period and walk away with the vehicle or give it back to the company and buy another vehicle from them after handing over the vehicle to them.

It is now practiced by some banks now, rather than take over the car or pay the balance they give you the chance to reschedule the payment for another period.

 

Hope this helps.