Before anyone tries to get in touch, I know, they are completely different products. Hopefully this will be helpful for people like me that aren’t planning on purchasing the car and are looking for the lowest overall cost.
First things first, what’s the difference between the two products?
PCP
PCP (Personal Contract Purchase) is a way of purchasing a new car with cheaper monthly payments, by giving you a lump sum (Guaranteed Final Value / GFV) to purchase the car at the end of the term.
Traditional dealers tend to be able to throw in some decent discount on PCP deals as they tend to skim some of the APR you pay each month, so there’s some extra cash to be had for them over a cash deal. With Tesla however, short on buying an inventory car (there are Model 3’s starting to turn up now) there are no discounts.
When you have a PCP deal, the car is in your name and is effectively your car. At the end of your agreed term, you either pay the lump sum or hand the car back. Normally dealers (probably not Tesla!) will try and get in touch near the time of the deal running out to get you in a new car.
With a PCP deal you also get the option (although the finance companies would really rather you wouldn’t) to Voluntarily Terminate (VT). VT’ing means you can end contract once you’ve paid off 50%. Doing this does get you a mark against your credit record (neither negative or positive) but means you could get our of your deal early or not be lumbered with a car in negative equity.
PCH
PCH (Personal Contract Hire) Is basically you leasing the car from someone else, without any guarantee of owning the car at the end of your agreed term. This normally offers a better monthly price than PCP, but it’s never your car and the lease company does not have to offer you the option to purchase.
Both PCH and PCP need you to agree an amount of annual miles, adjusting this figure will affect the prices on offer. Make a point of checking out how much the additional miles cost, as it often works out cheaper to choose a lower agreed mileage rate and pay the difference at the end of the term.
Why might you choose to lease over PCP?
Well, PCP deals have taken a bit of a hit recently. Mercedes lobbied to have the way the deals are taxed changed from being a purchase to a service, as they argued that most people don’t tend to end up purchasing.
What this has meant is a change in rules, ensuring that the GFV has to be lower than the market rate, which has made the deals less competitive.
Should you choose PCP or PCH?
Sadly only you can answer that, none of the above constitutes financial advice and your situation will determine what option to choose.
I’d suggest considering if you are likely to purchase the car at the end of the term? If so, PCP would be the way to go. If you’re just looking for the cheapest way to get into a Model 3, then leasing might be for you.
Example pricing – Tesla PCP vs Octopus PCH
Again, they are different products so of course they will be priced differently. I’ve been speaking to Cyril at Octopus who did the deal to get me into a Model 3 and he’s been periodically been sending me the latest PCH prices, which I’ve put into a sheet to work out costs vs Tesla PCP.
The sheet factors in deposit / initial rental, how much that actually works out at per month, per year and even per mile. It’s based off the standard options for each model (SR+, LR and Performance), 10k miles and a 4 year term (you can do less than this, it’s just to get a comparison between the standard PCP and PCH).
hopefully this sheet will be useful for you, there’s Cyril’s direct contact details, a referral code to give to Octopus to get you £50 Amazon voucher and also my Tesla referral code which gets us both 1000 supercharger miles and entered into a raffle to win a Model Y or Roadster if you decided to order and found this guide useful and didn’t already have a code.
Here’s the sheet: Tesla PCP vs Octopus PCH prices