Personal Contract Hire

Everything you need to know about a PCH agreement

What is personal contract hire (PCH)?

Personal Contract Hire Explained

Personal contract hire, known as PCH or private contract hire for those in the leasing business, is designed for private individuals. There is a business version which you can see on our business contract hire page. It’s definitely the most popular approach to car leasing – over 70% of our lease agreements are Contract Hires.

Put in simple terms, a PCH agreement allows you to rent a car for 1 to 4 years, or up to 5 years if you’re looking at a van contract hire. Once the time is up, you hand the car back with nothing else to pay (so long as you keep within the terms of the agreement, of course).

In essence, you’re paying to use the vehicle for a set period, not to own it.

PCH Pros

  • You’ll have no concerns over the depreciation of the car as you won’t have to sell it at the end
  • In addition to this, there’s no risk of negative equity as you won’t be paying the full amount of the vehicle
  • Monthly rentals will stay low and consistent throughout the contract for easy budgeting
  • Road tax is included within the contract as you don’t own the vehicle, so are not liable to keep it taxed.

PCH Cons

  • You don’t own the vehicle
  • Mileage and condition charges will apply if you go outside of the contracted terms
  • The car has to be serviced, which doesn’t tend to be included within the contract price (although many brokers will have maintenance agreements available for an additional cost).

How is PCH price calculated?

 

A PCH agreement takes into account the retail price and the residual value of your chosen vehicle after the contract is over. This gives the finance house (the ones selling you the contract) an idea of how much they’ll be able to sell the car for after you’ve finished with it.

This is the main reason why a car that holds its value, such as a Mercedez-Benz or a BMW can have such a low rental value when their retail value is much higher than a Nissan, for example.

In order to calculate the level of depreciation, the mileage you’ve chosen is taken into account. If you’re driving 5,000 miles a year, you can rest assured you’ll be charged less than someone who’s driving 30,000 miles.

If you want to know more about how personal contract hire (PCH) works, download our guide below.

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