What is Personal Contract Hire?

The cheapest way of driving a new car: Personal Contract Hire

BuyaCar team
Apr 5, 2018

What is Personal Contract Hire?

Personal Contract Hire (often abbreviated to PCH) is effectively a long-term car rental. It’s often referred to as personal leasing too, as you pay a monthly fee to hire a car for a set period.

This period is usually between two and four years, and at the end of this pre-agreed period, you just hand the car back, and there’s no option to buy.

Short term-lease agreements like this are good for people who want to change their car frequently. They're also beneficial for people wanting to drive a diesel car. The future looks set for more diesel charges and taxes which can affect a car's value. However with this, you wouldn't pay more if the car suddenly lost value. 

Of course, you are left with nothing at the end of the agreement, so it’s never a great long-term deal.

Pros

✔ There's one fixed payment a month.

✔ It's usually the cheapest way to drive a brand new car.

✔ If the car loses value faster than expected, it's not your problem.

✔ Maintenance fees can be included in the agreement.

Cons

✘ There are mileage limits and penalties if you exceed them.

✘ You have to return it at the end of the agreement and won’t own it.

✘ Personal Contract Hire is most common on new cars and it’s harder to get for a used car.

✘ You may be liable for the full amount if you end the lease early.

 

Personal Contract Hire (personal car leasing): How it works

1 Choose the car you want. Most major manufacturers offer Personal Contract Hire deals. Choose the length of your agreement, and finally, a mileage limit.

2 Usually, this is when you’ll pay an initial rental payment. These are based on the monthly fee, and often equate to three or six monthly payments.

3 Make the same monthly payments for the course of your agreement.

4 Hand the car back. Fines will be applied if the car is damaged, or if you’ve gone over the mileage limit.

Personal Contract Hire on used cars

Personal Contract Hire is, in general, pretty uncommon for used cars. However, you can still lease a second-hand model by taking out PCP finance. With this method, you can hand your car back at the end like with Personal Contract Hire agreements, or you can buy the car outright.

Getting a cheap Personal Contract Hire deal

Comparing Personal Contract Hire deals is easy because there’s no finance to deal with. You make an initial payment, and then one set monthly instalment for the remainder of the agreement. And you don’t need to consider the car’s future value either. 

Do check if maintenance is included, as this varies from deal to deal.

And it’s important to remember that while Personal Contract Hire deals are the cheapest way into a new motor, you’re left with nothing after the agreement. If you have the savings, it may be cheaper in the long run to buy a car, then sell it when you want or need to.

Is there an option to buy after the Personal Contract Hire has finished?

Officially, under the stipulations of the contract, there’s no option to buy. But if you do fall in love with a car, it’s worth asking the lease company. After all, after the contract has finished, it is their car and they can do what they want with it.

Can I cancel a Personal Contract Hire agreement early?

Rules and cancellation policies change from agreement to agreement. And you can cancel early. However, you may be subject to penalty charges, or even a bill for all of the outstanding monthly fees. 


What happens if I crash a Personal Contract Hire car?

One of the conditions of Personal Contract Hire insurance is (usually) taking out fully comprehensive insurance. This would cover any repairs.

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

You would be responsible for making up the difference. Guaranteed Asset Protection (GAP) insurance may cover this.

Many insurance policies also come with new car replacement cover. This 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 year of ownership. This would likely clear any settlement with the finance company, negating the need for GAP insurance.

             

                

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