Personal Contract Hire (PCH) Explained
What is personal contract hire (PCH)?
Personal contract hire (PCH, also known as personal leasing) is a long-term vehicle rental agreement. It is a solution for private individuals and is becoming a more popular alternative to purchasing brand new vehicles for car users.
You pay to ‘rent’ the vehicle throughout the duration of your contract, and then return the vehicle at the end of the agreement. You don’t have to worry about depreciation values and disposal of the car as this is the responsibility of the finance company.
How could PCH work for you?
If you choose to lease a car on a personal contract hire basis, you will make a series of monthly payments for the duration of your lease agreement (24, 36 or 48 months, for example), having already paid an initial rental.
You pay for the usage of the vehicle throughout your contract, and then return the car to the finance company at the end of the agreement without any further obligations, leaving you free to lease or purchase another vehicle.
The key features of personal contract hire
- PCH is the most common form of private car leasing
- Fixed monthly rentals cover the rental of the vehicle, plus any maintenance options if chosen
- The monthly rentals are calculated by taking the following into consideration:
- The cost of the vehicle
- The contract period
- Anticipated residual value of the vehicle (how much the vehicle is likely to be worth at the end of the contract)
- Mileage allowance (as chosen by you before the start of your contract)
- Any additional options, such as a maintenance contract
- You never technically own the vehicle – it remains the property of the finance company. However, this means you do not need to worry about the vehicle’s depreciating value
The key benefits of PCH
- Low initial rental
- Fixed rentals for the whole package, making budget planning easier
- Flexible terms to meet your finance requirements and driving habits – with variable contract duration and mileage terms
- Maintenance of vehicles can be included in the monthly fees, spreading the cost
- Allows you to use a vehicle that might otherwise be unreachable in terms of its on-the-road (OTR) cost
- When returning the vehicle at the end of your agreement, you do not need to worry about it depreciation or disposal
What happens at the end of the contract?
At the end of the contract, the vehicle is returned to the leasing provider, meaning you are free to hire or purchase another vehicle without any outstanding financial obligation.
If you have exceeded your agreed mileage, an excess mileage charge will be payable, worked out on a ‘pence per mile’ basis as set at the start of your contract.
When returning your vehicle, it will also be assessed according to the BVRLA Fair Wear and Tear guidelines. Any damage that falls outside of these guidelines may be subject to end-of-lease penalty charges. For more information on this, visit our Fair Wear and Tear guidelines page.