Savings compared to PCP

Legal information & disclaimers

Disclaimer

There are several things that can affect the monthly payment made on a PCP contract. The PCP rates, and corresponding savings or costs versus a lease contract are therefore estimates. It is possible that you would be able to achieve a PCP cost either more expensive or cheaper than the amount displayed on LeaseLoco.

The PCP rates calculated on LeaseLoco are there to serve as a guide for you to quickly gauge if you are likely to save money or not by leasing the car instead of buying it on a PCP contract. These figures are not an exact science, nor are guaranteed in anyway by LeaseLoco. Always perform your own calculations to ensure you are happy with and understand the different options you have in financing your desired vehicle.

How do we calculate the rates?

PCP monthly payments are calculated using the actuarial method. There are 3 key variables to take into account when calculating the monthly payment for a PCP contract:

The amount financed (normally equal to the purchase price of the car, assuming no deposit)
The Annual Percentage Rate (APR)
The Guaranteed Minimum Future Value (GMFV)

Essentially, you are financing the difference between the purchase price and the GMFV at the rate of the APR.

For a more visual example, if the financed amount is £30,000 and the GMFV is £16,200 with an APR of 4.9%, the payment will look like this.

Month	Starting balance	Interest	Repayment	Closing balance
1	30,000.00	122.50	670.96	29,451.54
2	29,451.54	120.26	670.96	28,900.85
3	28,900.85	118.01	670.96	28,347.90
4	28,347.90	115.75	670.96	27,792.70
5	27,792.70	113.49	670.96	27,235.23
6	27,235.23	111.21	670.96	26,675.48
7	26,675.48	108.92	670.96	26,113.45
8	26,113.45	106.63	670.96	25,549.12
9	25,549.12	104.33	670.96	24,952.49
10	24,982.49	102.01	670.96	24,416.52
11	24,413.52	99.69	670.96	23,842.27
12	23,742.27	97.36	670.96	23,268.67
13	23,268.67	95.01	670.96	22,692.73
14	22,692.73	92.66	670.96	22,114.43
15	22,114.43	90.30	670.96	21,533.78
16	21,533.78	87.93	670.96	20,950.75
17	20,950.75	85.55	670.96	20,365.34
18	20,365.34	83.16	670.96	19,777.54
19	19,777.54	80.76	670.96	19,187.34
20	19,187.34	78.35	670.96	18,593.73
21	18,593.73	75.93	670.96	17,999.70
22	17,999.70	73.93	670.96	17,402.25
23	17,402.25	71.06	670.96	16,802.35
24	16,802.35	68.61	670.96	16,200.00

Over a 24 month term we calculate the interest on the balance as ‘Starting balance x APR/12 (months)’. The Monthly payment is a complex mathematical calculation used to create the balancing amount so the payments result in the pre-determined GMFV.

As we can also see, this is why many PCP contracts are in negative equity early on in the contract, as whether it is a 48 month contract or 24 month, the interest paid is on the outstanding balance, and therefore reduces as more capital is paid off, with higher interest payments earlier in the contract.

How do we calculate the rates?

There are some key components to the assumptions we have made to calculate our PCP figures:

APR - We have analysed manufacturer PCP offers across every manufacturer that we advertise, giving a clear indication of manufacturer APRs charged.
GMFV – Again, through the same analysis, we have tabled the GMFV on market PCP offers for 2, 3 and 4 years PCP deals. We have taken averages of these GMFVs and applied different rates to align our estimated PCP rates with these averages.
Mileages – We have looked at excess contract mileage charges across the same data set to understand the cost impact on mileage. This allows us to create a variable PCP cost that takes into account contract mileage and create a like for like comparison against lease contracts with higher mileage allowances.