Example
We have used a new car with a list price of £10,170.00 travelling 12,000 mile per annum. A typical car in this group would be a Ford Fiesta 1.25 LX 5 door.
| Hire Purchase |
Personal Contract Purchase |
Lease Purchase |
|
| List Price | £10,170.00 | £10,170.00 | £10,170.00 |
| Purchase Price | £9,000.00 | £9,000.00 | £9,000.00 |
| Deposit | £900.00 | £900.00 | £900.00 |
| Monthly Rental | £272.25 | £195.67 | £184.00 |
| Final Payment | £0.00 | £3,000.00 | £3,420.00 |
| Fees | £125.00 | £125.00 | £125.00 |
| Forecast value | £3,300.00 | £3,300.00 | £3,300.00 |
| Total Cost | £10,826.00 | £11,069.12 | £11.069.00 |
| Average cost per month | £300.72 | £307.47 | £307.47 |
| Average cost per mile | 30.07p | 30.74p | 30.74p |
| Typical APR | 14.69% | 12.68% | 12.25% |
You will see that the total cost and cost per mile is similar in each example, however, the monthly repayments are quite different. This is because the hire purchase option repays the total cost of the car over the contract period. The lease purchase is lower than the PCP but has a higher lump sum payment, which is conditional. The estimated value of the car is less than the final payment and emphasises the problem with forecasting future values. The PCP has a slightly higher monthly rental but the final value is guaranteed and you will have the choice whether to buy or not. It is true that if you do not pay the lump sum you will not own the car but in this case you would be required to pay more than the car is worth.