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 an increasingly popular alternative to purchasing brand new vehicles among 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, leaving the finance company to worry about depreciation values and disposal of the car.
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 or 48 months, for example), having already paid an initial rental.
You pay for the use 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.
In some cases (subject to approval from the finance provider), you may be able to extend the vehicle contract.
Am I eligible?
This type of agreement is available to all financially eligible drivers looking to lease a vehicle for private use. To find out whether you’re likely to be eligible, take our finance eligibility questionnaire.
Are you over 18 years of age?
How many years have you been at your current address?
We need at least 5 years address history for a personal application
Are you in full-time employment?
How many years have you been with your current employer?
Have you ever been declined for finance before?
How many years ago was this?
Have you got any adverse credit on your file? eg. CCJ, missed/late payments, bankruptcy, IVA scheme
How many years ago was this?
You are likely to be eligible for personal finance based on the details you provided.
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
Considerations for PCH
Early termination can be expensive
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
You must return the vehicle in a well maintained condition. Any damage over and above that stated in the Fair Wear and Tear Guide will be subject to additional charges
Vehicle must be insured with full comprehensive cover
You will never own the vehicle as there is no option to buy it
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.
Personal contract hire case studies
Case study 1:
David is a manager in publishing, is married and has three children. He takes out a personal contract hire agreement on a BMW 3 Series Touring.
Duration: 24 months
Annual mileage: 12,500
Initial rental: £1,342.62 inc VAT
Monthly rentals: £447.54 inc VAT
At the end of the two year contract, David returns the vehicle to the finance company. He then chooses to take out another PCH agreement on the latest model of the BMW Series 3 Touring for a further 24 months.
Case study 2:
Matthew is a fitness instructor and is a single father of one. He takes out a personal contract hire agreement on a Volkswagen Golf.
Duration: 36 months
Annual mileage: 15,000
Initial rental: £1,013.61 inc VAT
Monthly rentals: £337.87 inc VAT
Please note: case studies created for illustrative purposes only.