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PCH - Personal Contract Hire

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PCH - Personal Contract Hire

Personal contract hire (PCH) is effectively long term car rental - you pay for the use of the car but you never own it.

You commit to hiring the car for fixed period and simply pay a monthly fee; an initial rental charge is also made.

While you run the vehicle you will have to insure it comprehensively and you must look after it - if you return it damaged you will face the costs of repair.

However, since the car is likely to be new, you will not have to worry about the car going out of warranty - any problems with the car will typically be dealt with at no cost to you.

There are other forms of car finance that you might want to consider - hire purchase and PCP. And of course there is the option of a standard car loan.

Pros & Cons of Contract Hire:

Pros:

  • Monthly payments will be lower than if you buy the car outright
  • You could afford a new car of a better brand than you otherwise might
  • At the end of the contract you simply hand the car back

Cons:

  • You must take out comprehensive insurance
  • You must agree a maximum mileage - if you exceed it you will have to pay an excess of 10-12p/mile
  • You'll never own the car

Best Car & Van PCH Deals

The advantages of contract hire are clear. The disadvantages may not be a big deal if you have no desire to own the vehicle, are happy to look after it and can control the mileage you drive.

If you compare PCH to the likes of PCP and HP then you will realise that contract hire could well be the cheapest. The only way to find out for sure what the best PCH deals are is to get proper quotes. We recommend you use our partner Zuto to do this as they are able to cover a broad range of options.

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Questions About Personal Contract Hire

Can I end a contract hire agreement early?

This will depend specifically on the terms of the agreement you have signed. It is very unlikely that you will be able to terminate the agreement early without some form of penalty payment. In the worst case you may be required to pay all the outstanding rental payments.

If you are considering this because you are having problems meeting your monthly payments then you should talk to your finance company in any case.

If you have paid more than 50% of the total amount payable ("tap") then you have the option of handing back the car and walking away - so-called voluntary termination. But you will be required to pay a penalty sum that should be specified in the contract.

If you want to more flexibility in terms of contract terms you may be better off considering PCP instead.

Does PCH include road tax, insurance and servicing?

Road tax should be included in the monthly fee. In the case of servicing you may find that you have the option of deals with and without servicing included - you can then compare and decide whether including servicing makes financial sense. Insurance is not included in the monthly fee simply because premia vary enormously by individual.

Is personal contract hire available for used cars?

It is possible to get a lease on a used car, but if you are thinking that this will keep the monthly costs down then you may be surprised. It is true that used cars will have already suffered their largest drop in value, but there are other reasons why new car costs may not be as high as you think.

With new cars leasing companies are able to negotiate substantial discounts - both through the sheer scale of their purchases and because of short term promotions and rebates. And with a new car you'll get the full benefits of the vehicle warranty.

So, if you are thinking of leasing a used car make sure you also get a quote for a new car too - then you can see the difference.

What's the difference between personal contract hire and leasing?

In simple terms there is no difference - personal contract hire is simply a form of car leasing i.e. long-term rental.

Video: PCP vs. HP

 

Representative Example

Loan Amount

£7500

Monthly Repayment

£222

Loan Term

48 mnths

Total Repayment

£10,661

Rate of Interest p.a.

18.5%

Representative APR

20.1%

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