What makes personal leasing for a car better than PCP or HP?

**PCP - Personal Contract Purchase** This is essentially a loan in which a final payment ("balloon payment" or "guaranteed minimum future value (GMFV)") is deferred, making the monthly sum due lower that a traditional loan. At the end of the fixed period the buyer has the choice to either pay the final payment, or return the car to the manufacturer. These deals are often structured in such a way that the final payment is lower than the value of the car, which allows the buyer to use the difference between the two as a deposit for another loan. This value can be used at any manufacturer, as effectively the new dealership will be paying the market value for the vehicle with part of this being used to pay off the existing loan, and the remainder being used to fund the new car. PCP deals have mileage limits, with fees for exceeding this during the contract, and vehicles are expected to be returned in a good condition, again with fees for damage beyond acceptable wear and tear. Criticism of this method is often calls this "perpetual car prison" as it accustoms the owner to a certain quality of vehicle at a much lower monthly cost than it would otherwise be. In order to own the car outright they need to make that final payment, which is often 30-50% the value of the car when new, so most drivers will simply trade it in for a new model, with another monthly payment. In most scenarios, under a PCP deal you are not the owner of the vehicle until the final payment is made, however due to the structure of the deal being a loan for a fixed amount you have the flexibility to repay some/all of this early, and to exit the agreement earlier by returning the car. This is known as "Voluntary Termination" and is applicable when 50% of the borrowed amount has been repaid. **PCH - Personal Contract Hire ("lease")** Both maintained and non-maintained leases are available in the UK, and these often have comparable monthly payments to a PCP deal. The key difference is that under a PCH contract, the car always gets returned to the finance company at the end of the term. There is no legal right to buy the vehicle and own it beyond the end of the contract. PCH deals are sometimes cheaper than PCP as manufacturers might offer incentives on certain models to get them on the road, but there's often less choice in trim levels or colours than there would be under a PCP. A PCP customer will often be able to make a custom order, with the exact configuration they want, while PCH customers will be limited to manufacturer availability without paying much higher costs. With a PCH contract, you cannot exit early or without paying significant penalties. **HP - Hire Purchase** This is essentially a regular loan, except the loan is secured against the vehicle and the vehicle is owned by the finance company until you make the final payment. The finance company can repossess the car if you fail to make payments. A hire purchase often requires a deposit and *can* offer lower interest rates than a standard loan.