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Our guide to Personal Contract Hire (PCH) car finance

If you like the idea of switching your car regularly without having to actually buy it, Personal Contract Hire might be for you

Car finance

Personal Contract Hire (PCH) is a type of car leasing that means you can enjoy a car for a contracted period before handing it back and choosing something else.

You’ll never be the legal owner of the car, but you’ll get to drive it until your contract ends (usually after a few years). It’s a great option if you like switching cars regularly or don’t want the hassle of selling a car.

If PCH doesn’t sound like the option for you and you want a finance car you can keep, Personal Contract Purchase (PCP) or Hire Purchase (HP) might be a better option.

Is PCH finance a good idea?

You might think PCH finance is the choice for you if you would prefer not to own a vehicle and want to swap to something new every few years.

Most people choose to lease their car with a PCH contract over two to five years, and then they’ll hand it back when their contract ends.

This does mean you won’t have to account for depreciation (when your car loses value over time) or make a balloon payment at the end of your contract like PCP finance.

However, unlike PCP, you will never have the opportunity to own the car.

What are the advantages of PCH?

PCH car finance definitely has its benefits:

  • Contracts are flexible, so you can decide how long you’d like to keep the car.

  • You’ll get to drive a new vehicle with manageable monthly payments.

  • There’s no balloon payment at the end of the contract – you’ll simply hand your car back.

  • Your monthly payments are fixed and will stay the same through your whole contract.

  • There’s no risk that you’ll lose money from depreciation as you won’t ever have to sell the car on.

  • You’ll never have the hassle of selling a car.

What are the risks of PCH?

PCH car finance is not for everyone, and there are definitely some drawbacks to consider:

  • If you return your car with significant damage that’s not classed as fair wear and tear, you’ll have to pay damage charges, which will be set out in the hire agreement.

  • You’ll have to stick to an agreed mileage limit, and there will be a charge if you go over this limit.

  • Ending your lease contract early could mean you might have to pay off the leasing costs in full.

  • At the end of your contract, you’ll have to hand the car back – that's a pain if you’ve really grown to like it!

  • You can’t sell the car as the finance provider legally owns the vehicle.

Is PCH the same as Hire Purchase (HP)?

PCH and HP car finance are not the same – in fact, they’re actually very different.

With a HP finance agreement, you’ll pay an initial deposit at the start of your contract and pay off the rest of your balance across monthly instalments.

When the contract comes to an end and you’ve made your final payment, which is likely to include a small ‘option to purchase fee’, you'll be the legal owner.

With PCH car finance, you’ll never be the legal owner and will have to hand your car back at the end of your contract.

What happens at the end of a PCH contract?

At the end of your PCH finance contract, it’s time to say goodbye to your car.

You’ll need to return your vehicle and won’t have the option to make a balloon payment and keep it, like with PCP.

Your car will be checked over for damage outside of fair wear and tear, and you might have to pay damage charges if there are significant repairs to be made.

You’ll also need to make sure you’re within your mileage limit, as you’ll have fees set out in your contract that you’ll need to pay should you go over.

Can you end a PCH contract early?

You might be able to end your PCH contract early, but you should speak to your finance provider to discuss your options.

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