A Guide to PCH (Personal Contract Hire) Finance

The most basic type of personal car leasing is personal contract hire. Even though it is very popular, not everyone knows exactly how it works and in what cases it is wise to sign this type of a contract. If you are interested in car leasing or in getting a new car in general, this text is for you – its focus is to describe how personal contract hire works and explain for whom it is an ideal method of financing a new car.


Personal contract hire is, unsurprisingly, almost the same kind of car lease deal, as a normal contract hire. The only difference is the fact that personal contract hire is not an offer for companies, but for private individuals, instead. With this agreement you take control of a vehicle for a set period of time (“lease period”) in exchange for paying monthly fees that are calculated up front. What is very important is that the vehicle in question does not become your personal possession after you sign the contract, it still belongs to the lessor. After the lease period is over, you simply hand the car back to the dealership and are free of any commitments. It has some pros and cons, but overall, this solution is perfect for some people. If you would like the opportunity to purchase your car at this juncture, then consider PCP finance.

The payments are determined on a basis of several factors. The most important is the car’s estimated loss of value (the difference between how much the car is worth as brand new and how much will be worth after you finish leasing it). What matters too, is your planned monthly mileage. The more you drive, the more you have to pay, because car’s wear and tear highly depends on how much it is used. You have to state the estimated monthly mileage while negotiating the contract and you have to be honest – underestimating the mileage is a mistake that will cost you extra every month of the lease.

What are the pros of personal contract hire?

#1 The prices are fixed and nothing will surprise you (if you do not make any extra miles, obviously).
#2 Initial payment is relatively low (usually it is not more than three monthly payments).
#3 Personal contract hire allows you to get a brand new car for less money, than a traditional personal loan.
#4 You do not have to worry about trading in your car in order to get a new one – you will just have to hand it back to the dealership.
#5 Personal contract lease makes expensive cars much more available.

What are the cons?

There are some disadvantages of personal contract hire, too:

#1 Monthly mileage limit may be sometimes very limiting (and each extra mile costs extra).
#2 You have no option to buy the leased vehicle at the end of the contract.
#3 You have to pay a lot for any unexpected signs of wear and tear.

Summing up, getting a car via personal contract hire is a good decision if you are financially stable and change cars every few years. With personal contract hire you will save some money and changing the car will be simpler.

Image Source: Images of Money / Flickr - Licensed for reuse under Creative Commons 2.0
A Guide to PCH (Personal Contract Hire) Finance A Guide to PCH (Personal Contract Hire) Finance Reviewed by Kattie Czarnecki on Thursday, December 12, 2013 Rating: 5

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