Personal contract hire

If you're in the market for a new car but don't want to commit to buying one outright, Personal Contract Hire (PCH) is a great way for drivers to get behind the wheel of a brand-new vehicle. 

We’ll explain how Personal Contract Hire works and how it differs from other types of car finance, as well as sharing important considerations to think about before taking out a contract.  

In this guide:   

• What is Personal Contract Hire (PCH)?  
• How does Personal Contract Hire work?  
• Taking out a car leasing contract 
• Main benefits of Personal Contract Hire   
• How is Personal Contract Hire different to buying a car?  
• How does Personal Contract Purchase (PCP) differ from Personal
  Contract Hire (PCH)? 

What is Personal Contract Hire?

When most people refer to the term ‘car leasing’ they are actually talking about PCH. Personal Contract Hire is effectively a long-term car rental that enables you to drive a new car every few years by paying a fixed monthly payment.  

How does Personal Contract Hire work?  

When you take out a Personal Contract Hire agreement, you’re able to drive your car for an agreed period of time. This duration is known as the 'lease period'.  

• Contract length - You can choose the length of the contract to suit your future plans. Most lease contracts tend to be for either two, three or four years.
   
• Fixed payments - The fixed monthly rental covers the depreciation on the car, as well as the cost of the lease. Your monthly cost also includes your road tax and, as you're leasing for personal use, the VAT is included. You can also add a maintenance package if you'd like the added peace of mind of knowing you'll have no surprise garage bills. 
  
  
• Deposit - You may have to pay a deposit before leasing your car, but it's usually cheaper than other finance options or buying a new car.  

• Annual mileage - You need to agree on an annual mileage allowance when you take out your PCH agreement. There's no point in paying higher costs if you're not putting in a lot of miles, so this can be changed to suit your circumstances. There may be additional charges if you go over your mileage allowance, so it's important to try and stick to this during your lease.  
  
  
• End of contract - When your contract ends, you simply need to hand back the keys (and the car) and either walk away or choose a brand-new car and lease deal. You don't have to buy the car at the end of your lease, so there is no hefty balloon payment to budget for or worry about. 

Taking out a car leasing contract

There are some important things to consider to make sure you find the right car finance option for you:

• What monthly payments can you afford? 
• Do you have available funds to put down as a deposit?
• Are you looking to purchase the car at the end of the contract? 
• What is your average annual mileage? 
• How likely is it that your circumstances will change during the contract? 

One of our main goals at LeaseCar is to make sure that you end up with a contract that is best suited to your needs.  

Once you've chosen your car and lease agreement, we'll sort out the necessary credit checks and finance package. When you're happy with everything, we'll get your car delivered to your doorstep fast and hassle-free. All you have to do is sit back and start planning your next road trip.  

The main benefits of Personal Contract Hire 
Personal Contract Hire agreements have many perks, which is why more and more drivers are turning to them as their preferred way to finance a new car. 

• Change your car every 2-3 years for a new one 
• Fixed monthly payments for the duration of your contract  
• Low monthly rental costs, meaning your budget will go much further 
• Drive a car you might not be able to afford in other circumstances 
• Road tax and warranty are included within your monthly rentals, although  
  you will still need to pay for vehicle insurance and breakdown cover 
• Option to add a maintenance package to your contract 
• Don’t need to worry about depreciation or reselling the car 

How is Personal Contract Hire different to buying a car?

Purchasing a car outright can come with some risks (especially if you're buying second-hand), as you don't know the car's history. You could be taking on a whole host of costly mechanical problems.  

Choosing to purchase a car also means taking on the task of selling the car when you're ready for a new vehicle. This includes covering advertising costs, organising viewings if you're selling privately and, if you part exchange, accepting an offer that's often below your expectations. All vehicles depreciate, but selling your car can be heart-breaking when you realise just how much its market value has fallen.  

With a Personal Contract Hire agreement, the depreciation is worked out upfront and factored into your monthly rental. Depreciation rates can fluctuate over time, but you don't have to worry about that - you won't pay a penny more at the end of the agreed lease.

How does Personal Contract Purchase (PCP) differ from Personal Contract Hire (PCH)?

Personal Contract Purchase (PCP) is a plan that gives you the option of buying the car at the end of the contract by paying a one-off balloon payment. Whilst this can be a good option if you want to keep the car, the balloon payment can be costly. 

With Personal Contract Purchase, no deposit is required, although you might have to pay an initial rental upfront. Personal Contract Purchase deals also often include the option to end the agreement early by paying off the difference between the amount you owe and the current market value of your car. 

A Personal Contract Hire (PCH) agreement essentially means that you rent a car for a set period of time. There usually isn’t an option to buy the car at the end of the contract (is dependent on the provider and the terms), but this type of contract always gives you the option to drive the latest model of car.