What is Personal Contract Hire?

How to get some of the cheapest monthly payments on a brand new car: Personal Contract Hire

BuyaCar team
Sep 30, 2018

What is Personal Contract Hire?

Personal Contract Hire (PCH) is long-term car rental because you pay a monthly fee to hire a new car for a set period. It’s also known as personal leasing.

This agreement typically lasts for between two and four years, and at the end of this pre-agreed period, you return the car, and there’s no option to buy.

Short term-lease agreements like this are good for anyone who likes to change their car regularly for a brand new one, although it's important to agree an accurate mileage limit to avoid penalty fees. These will also be applied if the car is returned damaged.

PCH also offers peace of mind for diesel owners. If you're concerned that future diesel charges and taxes may affect your car's value, then it won't be your problem with PCH. It's the leasing company that will lose out if your car loses an unexpected amount of value.

If you are looking for a used car, then PCH is unlikely to be available. Instead, Personal Contract Purchase (PCP) finance offers similarly low repayments but more flexibility at the end of the agreement.

PCP pros

✔  One fixed payment per month
✔  Often cheapest for new car monthly payments
✔  No liability for unexpected drop in value
✔  Maintenance fees can be included

The PCP negatives

Penalties for exceeding mileage limits
No guaranteed option to own the car
Not commonly available for used cars
Can be difficult to end early

Personal Contract Hire: how it works

  • 1 Choose the car you want; the length of your agreement; and your annual mileage.
  • 2 You will normally make an initial rental payment, often equivalent to three or six monthly payments.
  • 3 Pay fixed monthly instalments over the course of your agreement.
  • 4 Return the car. Penalties apply if the car is significantly damaged, or if you’ve gone over the mileage limit.

 

 

Personal Contract Hire on used cars

Personal Contract Hire is not common for used cars. You can take out a lease-type agreement on a second-hand car using PCP finance.

This brings similarly low payments because you only repay part of the car's value. At the end, you can return the car, as with PCH, or buy the car outright by paying off the remaining finance.

 

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.

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

It’s important to remember that while Personal Contract Hire deals offer some of the most affordable monthly payments, they aren't generally the best value in the long run, as 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 if you can extend the contract or even buy the car from them.

There's no guarantee that they will agree, particularly as a one-off sale is likely to require extra effort, but you may be in luck.

 

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 are likely to 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.

Latest jargon busters

  1. What is PCP?

  2. What is a mild hybrid car?

  3. What is APR?

What our customers say