What is car leasing, and how does it differ from a PCP?

PCP for business and contract hire: where the regimes part company

1. A lease is hire, so the credit rights do not attach. Contract hire is a consumer hire agreement rather than a credit agreement. That matters because the protections people rely on most are credit protections: voluntary termination under s.99 and s.100, early settlement under s.94, and the s.90 rule blocking repossession once a third is paid. None of them attaches to a hire agreement. Consumer hire has its own regime with its own, narrower, termination terms set mainly by the contract.
2. PCP is credit with a purchase option, and that is the difference. Under a PCP you can buy the car at the end for the guaranteed minimum future value, which is why it is credit and not hire, and why the Consumer Credit Act rights apply to it. If the car is worth more than that figure at the end, the difference is yours to use. On a lease there is no option and no equity, ever. That single structural fact explains most of the cost difference between the two.
3. Lease purchase is a third shape and is credit. Lease purchase, sometimes offered on vans, is a credit agreement with a deferred final payment that is mandatory rather than optional. It resembles a PCP with the choice removed: there is no hand back option, and there is no guaranteed minimum future value protecting you if the car is worth less at the end. Read whether the final payment is an option or an obligation, because the word lease in the name settles nothing.
4. Impaired credit narrows hire faster than it narrows credit. A hire company is handing over an asset it expects back in good order, so a file with an IVA, a county court judgment or recent defaults is often declined for contract hire when subprime motor credit would still be available. Where a guarantor is offered on a lease it is the hire company's own contractual arrangement rather than a statutory mechanism, so read what the guarantor is actually agreeing to.

A car lease calculator prices rentals, not a loan, and the inputs differ

A lease quotation is built from an initial rental expressed as a multiple of the monthly figure, a term, a contracted annual mileage and a maintenance option, and there is no deposit, no balance and no final payment because nothing is being bought. That is why a leasing estimate and a credit estimate for the same car rarely look alike: one is the price of using it, the other is the price of owning it.

Two inputs move a lease figure more than anything else. The initial rental multiple shifts cost between the first month and the rest, without changing the total by much, and the contracted mileage sets both the monthly figure and the excess charge per mile if you go past it. A quotation that omits the mileage or the excess rate is not comparable to one that states both.

A business car lease calculator is a VAT and allowance question first

For a business the headline rental is not the cost. VAT on a car rental is normally recoverable in part where there is any private use and in full on a van, and the rentals are deductible against profits with a restriction on higher-emitting cars, so the figure that decides anything is the net cost after both. A calculator quoting a gross rental is answering a different question from the one a business is asking.

The other business-only input is the guarantee. A lease to a young company, or to one with thin filed accounts, is often offered only against a director's personal guarantee, and no estimate shows that. Ask what the quotation assumes about the covenant before comparing it with anything.

A car lease early termination calculator uk figure is a charge, not a settlement

Ending a lease early is not voluntary termination and there is no statutory half rule, because consumer hire is not credit. What there is instead is a termination charge set by the agreement, commonly a proportion of the rentals left to run, and the number is the lessor's to state rather than a calculation you can complete from the outside.

So an online estimate here is a sense check and nothing more. Ask the lessor for the figure in writing with the date it holds good to, and compare it with what the remaining rentals would cost, because on a lease the two are often closer than people expect.

Common questions

What is car leasing?

Long term rental, usually contract hire: a fixed term, a fixed mileage, fixed monthly payments, and the car goes back at the end. There is no option to buy it.

What is the difference between leasing and PCP?

PCP is credit with a priced option to buy at the end, so the Consumer Credit Act rights apply and any equity is yours. A lease is hire with no option and no equity.

Can I voluntarily terminate a lease?

No. Section 99 applies to regulated credit agreements. A consumer hire agreement has its own, narrower termination terms set by the contract.

Is hire purchase or leasing better?

Hire purchase ends in ownership and carries the credit protections. Leasing has no ownership and usually a lower payment. Which is better depends on whether you want the car at the end.

Can you lease a car with bad credit or an IVA?

It is harder than getting credit, because the hire company expects the asset back in good order. Subprime motor credit is often available where contract hire is declined.

Is a lease purchase van deal credit or hire?

Credit. Lease purchase, sometimes offered on vans, is a credit agreement with a deferred final payment that is mandatory rather than optional. It resembles a PCP with the choice removed: there is no hand back option and no guaranteed minimum future value protecting you if the vehicle is worth less at the end.

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