PCH Finance

If you’re considering a new car or van and want an affordable and hassle-free way to drive one, personal contract hire (PCH) could be the perfect solution.

We’ve delved into the details of PCH, explaining how it works, its benefits, and important considerations to keep in mind. So, whether you’re a private individual or a business owner, our guide to understanding the intricacies of PCH will help you discover the best leasing options for your needs.

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What is PCH?

PCH is an extremely popular form of vehicle leasing, allowing individuals or businesses to drive a new vehicle without needing long-term ownership or a large upfront payment.

PCH involves entering into a fixed-term agreement, typically ranging from 24 to 48 months, where you pay a monthly rental fee to use the vehicle. Unlike other forms of car finance, such as Personal Contract Purchase, PCH does not offer the option to own the vehicle at the end of the contract.

Instead, you simply return the car to the leasing company at the end of the agreement without any further obligations or depreciation concerns.

The Pros of PCH finance

  • Lower Monthly Payments: PCH allows you to drive a new car without the high upfront costs associated with vehicle ownership. Instead, you pay fixed monthly rentals for the duration of the lease, which are typically lower than the loan repayments on a financed purchase.
  • Flexibility: PCH offers flexibility and freedom to choose a vehicle that suits your preferences and needs.
  • No Depreciation Concerns: There are no worries about the vehicle’s depreciation since you’re effectively renting the car and only need to return it at the end of the contract.
  • Maintenance and Servicing Included: Typically, PCH agreements include maintenance and servicing costs as part of the package, so you won’t have to worry about expenses related to routine maintenance. However, you should always check with the individual provider to understand what your monthly payments include.
  • VAT and Tax Benefits: PCH can offer potential tax advantages if you’re a business. The monthly payments and associated VAT can often be claimed back, reducing the overall cost of the lease.
  • Easy Vehicle Upgrades: PCH allows you to regularly change your vehicle and drive the latest models with the newest features and technologies, making it a great option for those who enjoy a new car every few years without the hassle of selling or trading in their existing vehicle


What to look out for?

  • No Ownership: Under PCH, you don’t own the vehicle, and there’s no option to buy it at the end of the agreement. It’s essentially a long-term rental agreement, so you won’t have an asset to sell at the end of the contract.
  • Mileage Restrictions: Typically, PCH agreements come with mileage limits, so if you exceed the agreed-upon mileage, you will incur additional charges, which can be costly. It’s, therefore, essential to accurately estimate your annual mileage and account for any unexpected journeys.
  • Penalties for Damages: PCH contracts often include fair wear and tear guidelines, so if the vehicle exhibits damage beyond the specified limits, you may be responsible for repair costs or face penalties when returning the car.
  • Early Termination Fees: A PCH contract typically has fixed terms ranging from two to five years. If your circumstances change or you encounter financial difficulties and want to terminate the agreement early, you will likely be subject to early termination fees.
  • Cost over Time: While the monthly payments for PCH agreements can be lower than other financing options, the overall cost over the contract duration can be higher because you’re essentially paying for the vehicle’s depreciation rather than building equity or ownership.
  • Limited Customisation: PCH agreements usually come with restrictions on modifications or customisation of the vehicle. If you enjoy personalising your car beyond a set of car mats and furry dice, PCH might not be the best choice


Which one is right for me?

Selecting the ideal car financing option relies on multiple factors. Your financial capacity, preferences about owning a car, and long-term goals should all be considered, and it’s crucial to assess your specific circumstances and priorities and thoroughly research and compare different financing options, including personal contract purchase (PCP) and lease purchase, to understand the benefits, drawbacks, and suitability for your specific needs.

Consulting with a financial advisor or speaking directly with a reputable car finance provider can provide further guidance.


The most common questions

How does PCH work?
Is a deposit required for a PCH agreement?
What is the mileage allowance, and what happens if I exceed it?
Are maintenance and servicing included in the PCH agreement?
What happens if I want to terminate the contract early?
Can I make modifications to the leased vehicle?
What insurance coverage do I need for a PCH vehicle?
What are the end-of-contract options for PCH?
Can I terminate a car lease purchase agreement early?
Can I customise or modify a vehicle under a lease purchase agreement?
Is a car lease purchase suitable for individuals with poor credit?