Getting a new car - personal contract plan (PCP) or personal lease(PCH)?

Watch out for the mileage restrictions on these types of deal. Typically 6000 to 8000 miles p.a. Go over the milage and the penalty cost per mile can be expensive. At the end of the term you have the option of handing it over, paying off the balance to own it or starting a new contract. ( sort of a never ending mortgage).

Depending on the plan I think you pay an initial deposit with monthly rental (PCH) or smaller deposit with monthly repayments and final optional payment if you want to own it (PCP).

Personally I think they are expensive and restrictive, but it's your choice.

p.s. Check the small print on the contract. You have certain responsibilities regarding care and servicing.

Does the lease option include servicing etc ?

I would have thought for the cost of the car - £11k for a base model i20 (probably get for less than 10k with a bit of haggling or even a pre-registered one) and a generous 5 year warranty, an outright purchase may be more attractive than the lease option given how restrictive the lease options seem to be.  

I think that plans around now have potentially good value especially if you want security and also might want a new car every few years. I can see the appeal, but shop around++.

If you are somebody who keeps a car for many years, not especially bothered about having the latest model and also fairly low mileage you might be better off to buy outright (lots of low or zero interest deals) and then pay for an annual extended warranty either from the manufacturer or a private company when the dealer warranty expires.

PS Honda in general finish very high in reliability surveys. My wife had a Jazz or Civic for 15yrs and never had a single unscheduled trip to a dealer or any meaningful fault. Ever.

Bruce

Lease agreements tend to make more sense IM(albeit limited)E with higher priced cars and those which depreciate slower.  For example you may find something like and Audi A3 or BMW 1 series makes more sense on lease than an Astra or Focus.

Don't forget that most lease agreements will have a requirement to return the car in a very good condition or pay to bring It to that condition. Maybe allow for something like 10% of the new cost as mitigation against this. Or plan on having a reasonable final payment to own the car so that you can then sell it privately. And don't assume that you can't negotiate the initial purchase price - you can in exactly the same way as if you were a cash buyer.

Thanks for all the advice - some good points to bear in mind. I'm sure I will want to hand it back after 3 years and am very sceptical about any "equity" that sales people tell me may come my way at the end of a PCP deal (sounds like a rerun of the endowment mortgage debacle), also I understand you can't take it in cash. The only pro PCP factor I can see is that manufacturers sometimes offer deposit contributions and 0% interest.

My current thinking once I've settled on a model is just to go for the lowest cost over 3 years @ 10,000 miles p.a. - I believe both options require you to return it in good nick and there are products to insure for this.

With PCP, you will likely have the dealer knocking on your door to offer you a new deal.

the reason being. Once you have paid 50% of the agreement you can hand the car back.

Regards, 

Nick

Some of these plans are applicable to second hand cars as well. Daughter and S-in -L got a 15 reg Fabia, for a substantial discount over new, mileage amount can be changed on their plan. 

Bought a new car eighteen months ago, looked at all the options - the cheapest was to pay cash. Most car manufacturers make more money (or as much money) out of those plans than out of the sale itself. Look at the small print.

Remember the Leasing company employs people who have to be paid and the Leasing Company also aim to make a profit on the money they borrow from the "bank" and lend to you.

I read somewhere that Banque PSA ( = Peugeot...) was more profitable than the car manufacturing division. The same applies to VW, probably.