Contract Hire

Personal Contract Hire (PCH) is one of the most popular methods for leasing a car. PCH is a contract hire agreement available to individuals, whilst businesses can also arrange contract hire agreements for their workforce which excludes VAT.

Personal Contract Hire allows motorists to get a new car every few years (depending on the term of the agreement) with payments that are usually lower than getting the same car through Personal Contract Purchase, Hire Purchase, or a personal loan. If you are considering financing your car through Personal Contract Hire, it is essential you understand how it works, as well as the benefits and the drawbacks before entering into a financial agreement.

How it Works?

PCH is a long-term rental agreement where you pay a fixed monthly fee for the agreed period on your contract – most PCH deals are 24, 36 or 48 months. You will also be expected to pay a deposit for the vehicle, which is usually the equivalent of either 1, 3, 6, 9 or 12 months of your monthly payments. It’s worth noting that the higher the deposit, the lower the monthly payments.

Once you have found the vehicle you want to lease, you will be required to undergo a credit check, although the checks are usually less stringent than if you were taking out a PCP, HP, or personal loan to finance the car.

If you pass the credit check, the finance company will require you to pay the deposit. Some companies also charge a processing fee – once you make these payments, the leasing company will submit your order to the manufacturer for the car to be built.

When the car is ready, you can either collect it or arrange to have it delivered. You will be able to drive the car for the term of your agreement while adhering to the contract conditions, such as driving within the specified mileage. However, if you exceed your mileage allowance, you will incur additional fees when you return the car.

At the end of the agreement, you simply return the car to the finance company. Unlike PCP, there is no option to purchase the vehicle, although you may be able to extend your Personal Contract Hire agreement at the discretion of the leasing company. You will need to ensure that you return the car with all original documents and in good condition. If the vehicle has any damage deemed more than general wear and tear, you may be liable for the costs.

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