Personal contract hire (PCH) is consistently cheaper than personal contract purchase (PCP), according to research conducted by Leasing.com.

The research found that leasing could save consumers more than £5,000 on premium car models and more than £1,200 on economy models.

Across the eight models that were compared, leasing was cheaper than all equivalent offers on PCP finance. For example, a leasing contract on a Fiat 500 cost £7,353.36 over 48 months while the same car on PCP cost a total of £11,245, adding up to £3,891.64 more for the consumer.

The number of consumers opting for PCH agreements has grown consistently over the past couple of years. The main difference between the two agreements is that the consumer does not own the vehicle at the end of a lease agreement. At the end of a PCP agreement, they have the option of paying the balance remaining and owning the vehicle outright. The final payment is the predicted future value of the vehicle at the time of underwriting. However, the majority of customers who use PCP agreements opt to hand the car back, meaning they were effectively in a more expensive leasing agreement.

Other advantages of PCH over PCP is that both are shown as a debt on someone’s credit file. However, a PCP debt reflects the full vehicle value while PCH assumes the total amount of lease payments due under the agreement which will appear as a lower figure.

In addition, vehicle excise duty (VED) commonly known as road tax, is included within leasing contracts, and incorporated into the cost of the monthly rentals paid by consumers. Maintenance is also usually available as an optional add-on to leasing contracts and, if taken, is incorporated into the monthly rentals.

Dave Timmis, managing director of Leasing.com, said: “Our research shows that personal leasing is consistently cheaper than the equivalent PCP offer, helping new car consumers to potentially save thousands of pounds over the course of their agreement. These savings aren’t reserved for just the more affordable new car models either, with many premium leased vehicles offering savvy consumers significant savings.”