What is PCH?

Personal lease or PCH deals explained: the cheapest way of driving away a new car

BuyaCar team
Apr 6, 2018

What is PCH?

PCH (Personal Contract Hire) is commonly referred to as personal leasing, as it’s effectively a medium to long-term car rental scheme.

The customer pays a monthly fee to hire a car for a set period of time, and hands it back at the end of this term. Rental agreements tend to be between two and four years, and there’s no final option to own the car outright.

It’s generally the cheapest way of getting a new car, so people can often afford a pricier car than they’d initially thought. For instance, a lot of premium branded cars like Audi are leased via a PCH agreement.

PCH agreements mean you can into a more expensive car than you’re accustomed too, plus it gives you the option of changing cars every few years. However, you never own the car and can’t sell it for money to put towards another car.

Good for

✔ Simplicity: there's one fixed payment a month.
✔ Value. It's normally the cheapest way to drive a brand new car
✔ If the car loses value faster than expected, it's not your problem
✔ Budgeting: maintenance fees can be included in the agreement

Not so good for

✘ Long distance drivers: there are mileage limits and penalties if you exceed them.
✘ Owning the car: you have to return it at the end of the agreement.
✘ Used cars: PCH is most common on new cars
✘ Ending the lease early: you may be liable for the full amount.

PCH personal car leasing: how it works

1. Find the car you want, choose the length of term you’re looking for and a mileage limit.

2. You’ll usually make an initial rental payment, based on the monthly fee. It’s often the equivalent of either three or six monthly payments.

3. You make the same, regular monthly payment throughout the term.

4. At the end, you hand the car back. Penalties will be applied if the car is damaged or you’ve gone over the mileage limit.

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Used car leasing

PCH is less common for used cars, but you can still lease a second-hand model by taking out PCP finance. This allows you to hand your car back at the end - like PCH - but also offers you the option of buying it once your deal is up, or trading it in for a newer car.


Getting a cheap car lease deal

Comparing lease deals is easy because there’s an initial payment, followed by one set monthly instalment for the remainder of the agreement. You’re not borrowing any money, so you don’t need to worry about interest rates, and you don’t need to take into account the car’s future value.

The only things to remember are that you take the initial payment into account and check to see whether maintenance is included.

It’s important to make sure that you stay within the mileage limit and avoid penalties for damage, or any savings could be wiped out.

Although PCH deals often offer the cheapest monthly payments on brand new cars, you are left with nothing at the end of the agreement. If you have the savings, you may prefer to buy a car and then sell it on when you want a different vehicle, without any penalties.

See the best car lease deals available now


Is there an option to buy after the lease?

There is no official option to do anything except hand the car back. However, if you do decide that you’d like to keep the car, it is worth asking the company that sold you the car, or the leasing firm, whether you can buy or refinance it. This may be possible but is never guaranteed.


Can I cancel a lease agreement early?

You can, but the leasing company is likely to impose penalty charges or even bill you for all of the outstanding monthly fees. The rules around cancellation do vary but will be covered in your terms and conditions.


What happens if I crash a leased car?

Taking out fully comprehensive insurance is usually one of the conditions of PCH finance, so this would cover any repairs that are needed.

If the car is written off, then the finance company will ask for a settlement amount to end the agreement. The insurance payout will go towards this, but may not cover the full amount.

In this case, you would have to make up the difference. Guaranteed asset protection (GAP) insurance may cover this difference.

It is worth bearing in mind that new car replacement cover is included with many insurance policies, which will pay for the cost of a brand new replacement if you are the first owner and your vehicle is written off in the first 12 months of ownership. This is likely to clear any settlement to the finance company without the need for GAP insurance.


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