Why is PCH cheaper than PCP?

Why are contract hire prices so much lower than PCPs? You don't own the car at the end but there is very little equity in it if you do.

Asked on 3 February 2021 by Martin H

Answered by Georgia Petrie
The total cost of a PCP contract tends to be higher than PCH in the long term due to deposits and balloon payments. But, as you say, you could own the car at the end so you’re paying towards owning an asset that you could sell one day. PCHs don’t have a final balloon payment as you don't purchase the car at the end of the lease. Your monthly payment on a PCH is calculated on the calculated cost of the vehicle use and its depreciation during the hire period. You can read more about leasing here: www.honestjohn.co.uk/car-leasing-explained/
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