PCP vs HP vs leasing: which offers the best value on this posh Chinese SUV?

Working out the best way to pay for a new car can be just as confusing as choosing which one to buy. With PCP, HP and leasing all offering different monthly payments, costs and levels of ownership, it’s not always obvious which option will leave you better off.

To help make sense of it all, we’ve compared all three finance options for the Omoda 7 to see which offers the best value. Using the 204hp 1.5-litre hybrid Knight model as an example, we’ve crunched the numbers based on three years of ownership and 30,000 miles of driving.

By the end, you’ll know how each option works, how much it could cost you and which is likely to be the best fit for your budget and the way you use your car.

Remember, you can buy a brand new or used car right here on Carwow. And you can sell your car, too. We’re here to help you through every step of your car-changing journey.

Leasing

Let’s start with leasing the Omoda 7.

At the time of writing, we found a lease deal on the Omoda 7 Knight through Carwow costing £270.81 per month over a three-year term with an annual mileage allowance of 10,000 miles. The initial payment is equivalent to 12 monthly instalments (£3,649.71), bringing the total cost of the lease to £13,128.06.

It’s worth noting that road tax is included in many lease deals, including this one. You’ll need to factor this cost in when comparing leasing with PCP and HP finance, which we’ll cover shortly.

One of the biggest advantages of leasing is that you don’t take on the financial risk of depreciation. When you buy a car, its value can fall significantly over time. With a lease, it’s the leasing company that absorbs that loss.

Depreciation still plays an important role, though, because it’s one of the biggest factors affecting your monthly payments. Lease prices are largely based on the difference between the car’s current value and what it’s expected to be worth when the agreement ends, along with financing and administration costs.

You’ll also need to return the car in good condition. If it has damage beyond what’s considered fair wear and tear – such as dents, deep scratches, kerbed alloy wheels or excessively worn tyres – you could face additional charges at the end of the lease.

Here’s a breakdown of the costs of leasing an Omoda 7 over three years with a 10,000-mile annual allowance. Road tax is included in the figures below.

Monthly payments ×35	£270.81
Initial payment	£3,649.71
Total cost to lease	£13,128.06

Personal Contract Purchase (PCP)

Next up, we have PCP finance, a flexible car finance option where your monthly payments cover much of the car’s expected depreciation rather than its full purchase price.

To create a like-for-like comparison with the lease deal, we’ve assumed a deposit of £3,500, a three-year term and annual mileage of 10,000 miles.

The recommended on-the-road price of the hybrid Omoda 7 is £32,005. After the deposit is paid, the amount borrowed from the finance company would be £28,505. Monthly payments start at £417.06, at the time of writing. This particular deal comes with 1.9% APR and a 1.88% annual fixed rate of interest.

At the end of the PCP agreement, you’ll have the option to make a final payment – often referred to as a balloon payment – of £15,144 to own the car outright, according to the Omoda calculator.

Alternatively, you can return the car to the finance company, provided it meets the agreed mileage and condition requirements. In that case, you won’t need to make the final payment, and the total amount paid over the three-year term would be £18,097.10.

You’ll then need to consider road tax.

For all cars first registered on or after 1 April 2017, you’ll pay a first-year rate based on the vehicle’s CO2 emissions. This rate can be checked using the official GOV.UK vehicle tax tables and may also be displayed on manufacturer or dealer websites. After the first year, most drivers pay the standard annual rate of £200.

In the case of this particular Omoda 7, road tax would cost £515 over a three-year term, comprising a £115 first-year rate followed by two years at £200 per year.

If you add the road tax of £515 (total sum over three years) to this, it would cost you £18,612.10 to finance the Omoda 7 on a PCP over three-years and 30,000 miles, providing you hand the car back at the end of the agreement. Remember, unlike most car leases, you’d have to consider car tax on top of your monthly payments.

Here’s a full breakdown of the costs of an hybrid Omoda 7 on PCP at a glance:

Initial deposit	£3,500
Regular monthly payments	£417.06
Optional final payment	£15,144
Road tax	£515
Total cost to PCP with road tax if you keep the car after the term	£33,756.10
Total cost to PCP with road tax if you return the car	£18,612.10

Hire Purchase (HP)

Now we move on to HP finance, where you pay an initial deposit and then repay the remaining balance for the full value of the car through fixed monthly instalments. Under an HP agreement, you hire the car until you’ve made the final payment, at which point you legally own the car.

For this comparison, we used the same £3,500 deposit as in our PCP calculations and spread the remaining balance over a 36-month term.

One thing to keep in mind is that HP finance doesn’t typically include annual mileage limits because the agreement is structured around you owning the car once all payments have been made.

Just like PCP, the recommended on-the-road price of the hybrid Omoda 7 is £32,005. After the deposit is paid, the amount borrowed from the finance company would be £28,505. Because you’re paying off the car’s entire value rather than deferring part of it to a final balloon payment, the monthly instalments are considerably higher than on PCP.

In the case of this Omoda 7 HP agreement, you’d pay £814.98 per month in the first 35 months, followed by a final payment of £815.98, at the time of writing.

Like the PCP agreement, this HP deal comes with 1.9% APR and a 1.88% fixed rate of interest.

The total amount payable would be £32,840.28, meaning you’ll have paid the full purchase price of the car by the end of the agreement.

This is where things become a little more complicated. Unlike leasing and PCP finance, you need to account for depreciation when calculating the true cost of ownership. Depreciation is the difference between what you paid for the car and what you can sell it for later. The greater that loss, the higher your overall cost of ownership.

Based on valuations from Cap HPI, an automotive data and vehicle valuation specialist, an Omoda 7 driven for three years at 10,000 miles per year is expected to lose around £16,500 in value, assuming it’s traded in to a dealer in good condition.

Taking that depreciation into account, along with £515 in road tax over the same period, the total cost of ownership comes to £17,015.

Here are all the numbers for you to look at in one go:

Initial deposit	£3,500
Regular monthly payments (35 months)	£814.98
Final monthly payment	£815.98
Total amount payable	£32,840.20
Depreciation loss (Cap HPI data)	£16,500
Road tax	£515
Total cost on HP finance	£17,015

Final verdict on costs

When we consider all the factors above, here’s how much it would cost you to own an Omoda 7 over three years when you take out PCP or HP finance or lease one:

Type of finance	Monthly payments	Total cost of ownership with road tax
Leasing	£270.81	£13,128.06
PCP finance	£417.06	£18,612.10 (if you return car)
HP finance	£814.98	£17,015

Our analysis shows that leasing is the cheapest way to drive an Omoda 7 over three years and 30,000 miles and comes with the lowest monthly payments out of the three finance options.

The calculations also suggest that you could save around £1,200 over three years in HP finance compared to taking out a PCP loan on the same car.

That said, the significantly higher monthly payments on HP are bound to put a lot of people off. Only seriously consider HP if you can afford those monthly payments, and plan to keep the car for more than three years, but also keep in mind that this option could save you in the long term.

Another thing to note is that with HP finance, you won’t have to worry about a balloon payment once the final payment has been made, at which point the car legally transfers to your name. You then have an asset worth, in this case, about £15,500 that you can sell or trade in to reduce the cost of your next car.

Ultimately, the right choice depends on how you use your car and whether you plan to keep it long term. But if you’re looking for the cheapest option, then leasing an Omoda 7 is really the way to go.

Car change? Carwow!

Looking for a new set of wheels? With Carwow you can sell your car quickly and for a fair price – as well as find great offers on your next one. Whether you’re looking to buy a car brand new, are after something used or you want to explore car leasing options, Carwow is your one stop shop for new car deals.

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