PCP (Personal Contract Purchase) car finance, sometime called a lease for young drivers

Car lease deals for young drivers

 

Young driver car lease deals allow you to drive a brand new car with lower payments than other vehicle finance. With new driver car deals at the end of the contract, you simply return the keys take out another one

How do car lease deals work?

Car lease deals (PCP) are becoming very popular with both young and new drivers:

  • The contract is for a fixed amount of time.
  • At the end of the rental period, you return the vehicle to the leasing company.
  • Monthly repayments for a car lease are less than for other new driver car deals.
  • No worry about the car losing value or having to sell it when the agreement ends.

The lease period is from 12 to 36 months with a deposit equivalent to three months payments.

The car leasing company will own the vehicle, but for the duration of the lease, you are responsible for insurance and maintaining the car.

With most new driver car deals you can make an additional monthly payment to include the servicing costs.

Pros of a car lease

  • You can drive a new car at low fixed costs.
  • No need to worry about resale value, warranties, vehicle tax, and maintenance.
  • Lower deposit and monthly repayments than with other types of car finance.
  • Unless you opt out, your lease agreement will be regulated which means you have certain legal rights and protections.

What happens at the end of the lease period?

It’s quite straight forward when the lease period ends you just hand back the keys and walk away or take out a new car lease agreement.

If you exceed the estimated mileage, or the car has been damage, a charge will be applied.

  • Distance is limited to about 10,000 miles a year, and you will be charged excess mileage if you go over this.
  • You will need to pay for any wear and tear above what is deemed to be “reasonable condition”.

What are the repayments options for a car leasing deal?

The monthly repayments on new driver deals lease should be less, on a like for like basis, than for other forms of car finance.

The value of the car you lease will affect the monthly repayments and any deposit required. One way of reducing the costs is to choose a car with a lower depreciation value.

The amount of the repayments will also be affected by:

  • The contract period – the number of months you lease the car.
  • The estimated mileage – the number of miles you expect to drive over the contract.

The amount of a car lease deposit varies.

  • No Deposit car lease deals will push up the amount of the monthly rental.
  • Deposit required lease deal –  the deposit will vary between three and six months of the monthly rental payment.

Cons of new driver car deal

  • You won’t own the vehicle.
  • If you lease a car with high depreciation, you could be well out of pocket.
  • If you don’t include servicing in the contract and the car is not properly maintained it could turn out expensive when you return the vehicle.

How about servicing on a car lease?

With some new driver car deals you will have the option of adding a car maintenance package, while this will increase the monthly repayments any concern of future servicing bills will disappear.

VAT on car lease deals

Prices quoted on most car leasing websites don’t include the VAT in the headline figure. OK, if you are a business, but individuals will need to pay an additional 20% (the current VAT rate).

Be aware of paying a large deposit on a car lease

Initial payments on car lease deals are flexible, and you may decide to pay a larger deposit than you need to.

  • While paying a large deposit will reduce the monthly repayments if you are in an accident, and the car was a write-off. No payments made towards the car will be returned.
  • Your insurance would pay the price of the car but the initial rental amount paid will not be repaid, and you would be out of pocket with no car.

If you do decide to take out a car lease, do consider the pros and cons of the size of your deposit.

Lease or buy a car! Infographic

car lease deals infographic

Useful links – car lease deals

The Finance & Leasing Association
Financial Conduct Authority

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