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What is Personal Contract Hire?

After talking about car finance options such as Hire Purchase and Personal Contract Purchase, the next in our series is Personal Contract Hire, also known as PCH.

Personal Contract Hire is a type of financial agreement where you rent a car long-term. This may be the right solution for you if you’re not looking to purchase the car at the end of the agreement. With PCH you don't even need to worry about depreciation, or vehicle disposal at the end of the agreement. 

How Does Personal Contract Hire Work?

Once your credit score has been checked and you’ve qualified for PCH, you will need to put down an initial rental on your car of choice and then pay monthly instalments, agreed with the leasing company, for the remainder of the financial agreement (generally one to three years). Once this ends, you will need to return the car to the lender. If you don’t like your car, you may be able to terminate your car lease early; however, there may be some hefty exit fees involved. If this is the case, you should contact us at the earlier opportunity to discuss your options.

Pros of Personal Contract Hire

  • Lower Initial Payment: PCH initial payment is generally cheaper than Personal Contract Purchase (PCP) or Hire Purchase (HP) as you won’t have to fund the entire cost of the vehicle, but only pay a deposit equivalent to the one month to twelve months (this will determine your monthly repayments).

  • Fixed Monthly Payments: Similarly to Personal Contract Purchase (PCP), with PCH you will know your monthly payments before entering the agreement, so that you can plan you other expenses around your car finance.

  • No Need to Worry About Vehicle Disposal or Depreciation: You won’t need to worry about reselling your car or disposing of it at the end of your agreement; you will just hand it back to the dealer, hassle-free, since no balloon payment is required as in the case of a PCP agreement for instance.

  • You Can Include Maintenance: With PCH you will have the option of including maintenance with Perrys; however, this may lead to higher monthly payments. Regardless, if you’re interested in including maintenance of your vehicle, do get in touch and we’ll be happy to discuss options with you.

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Cons of Personal Contract Hire

  • You Can’t Purchase the Car: With PCH, regardless of how you feel about your car at the end of your finance agreement, you won’t be able to purchase it and keep it, you must hand it back to the dealership.

  • Fixed Mileage Allowance: With PCH you will need to agree to a fixed yearly mileage (with Perrys it’s generally between 5,000 and 30,000 miles), so make sure to know roughly how many miles you drive in a year before signing a contract, as the monthly payments will be tailored to your chosen mileage.

  • Charges Apply to Cancel Early: If you feel like the vehicle you’ve picked is not the right one for you; maybe it’s not the right size, it’s not as fuel-efficient as you thought it would have been, inc. you may be able to hand it back. However, you may need to pay some hefty exit fees to leave the contract before the agreed term.

  • No Modifications Are Allowed: As you are not the car owner, you won’t be able to modify it, as you will need to return the car in the same condition in which it was leased to you.

Example of Personal Contract Hire Offer (at the time of writing)

Here is an example to help you better understand the dynamics of Personal Contract Hire:

Let’s say that you’re interested in a Kia Picanto Hatchback 1.0 X-line and would like to lease it using PCH for 36 months, paying an initial term of 9 months, not including any maintenance package and agreeing to 10,000 miles a year. This will only set you back £180.35 a month and £1,623.16 in terms of initial rental. Differently, if you’d like to pay an initial rental of 12 months, this will lower your monthly payments to £168.84, but set you back £2,026.07 from an initial rental point of view.

We hope our article has helped you better understand the dynamics around Personal Contract Hire. However, should you be interested in any particular car brand and model, don’t hesitate to visit our Perrys Leasing website, place an enquiry with us and we’ll be more than happy to help. 

Tags: *Car_Finance *Personal_Contract_Hire *PCH *Car_Finance_Agreement *Car *Finance

Written by Lucrezia | 3 min read
25 May 2022