Is Personal Contract Hire (PCH) the best car finance choice for you?

6 min Read Published: 26 May 2021

What is PCH and is it right for youWhat is Personal Contract Hire?

Personal Contract Hire - or PCH - is also known as car leasing. As with any other leasing arrangement, you don't own the vehicle and have to return it at the end of the finance agreement. Unlike other finance packages, such as Hire Purchase (HP) or Personal Contract Purchase (PCP), there isn't the option to buy the car.

PCH is often seen as a good choice for those who want to keep the cost of motoring to a minimum as the monthly payment usually covers the cost of maintenance, servicing, tyres and even road tax. As long as you don't damage it or exceed the agreed mileage, you should only have to pay for insurance and petrol.

How does Personal Contract Hire work?

  • Decide which make and model of car you are interested in - whether it is petrol, diesel, hybrid or electric will also affect the cost
  • Research PCH deals - this could be from a finance company or direct from the manufacturer
  • Agree on the maximum mileage you will do - if you exceed this, you will typically have to pay 10p for every extra mile
  • Decide on the length of the finance deal - this is generally between 2-4 years
  • Pay a deposit - this will generally be the equivalent of several months' payments
  • Pay a set monthly amount - this may cover the cost of maintenance, tyres and road tax but you need to check the terms and conditions ahead of taking out the deal
  • Return the car at the end of the deal - you will be liable to pay for excess mileage and any damage beyond normal wear and tear

How to find the best Personal Contract Hire deals

With so many car leasing options available, it can be difficult to know which one to choose. While you don't want to pay over the odds, you also don't want to get stung by hidden charges. The key questions to consider when choosing your PCH deal are:

  • What is the difference in cost between different length contracts? The difference in monthly cost between a shorter and longer-term arrangement isn't always proportionate, which means it is always worth comparing the cost over, say, two, three or four years to see which offers the best overall value.
  • What is included in the deal? Are extras such as servicing and tyres included?
  • Are there any additional administration fees on top of the deposit payment?
  • Is the total amount you will repay in line with - or less than - what you would reasonably expect the car to depreciate by over the same period? The leasing companies' business model works through sourcing new cars, leasing them for a set period and then selling them on, which means if you are paying significantly more than the depreciation over that time, you are probably over paying.
  • What reviews has the company got from previous customers? If it has a reputation for overcharging for minor repairs, for example, it may be worth going elsewhere.

What are the advantages of Personal Contract Hire?

  • It can work out cheaper than other finance options, particularly on high-end cars
  • If servicing and maintenance costs are covered, it keeps the overall cost of motoring down
  • You may be able to extend the lease at the end of the contract, possibly securing a reduced price if you can negotiate one
  • You don't have to worry about the value of the car depreciating

What are the disadvantages of Personal Contract Hire?

  • You won't own the vehicle at any point
  • The car is likely to be seized if you don't keep up with the monthly payments
  • You are limited to certain mileage and face additional cost if you exceed that
  • The car will be inspected when you return it and you could face a bill for any damage it has sustained
  • If the car is written off and the insurance company doesn't cover the total cost, you may be liable to make up the difference

What are the alternatives to Personal Contract Hire?

For a full breakdown of the different car finance options available, read our article: "Buying a car: what are the best finance options?"

For an in-depth explanation of HP, read "What is Hire Purchase?"

For details of PCP, read "What is Personal Contract Purchase - and is it the best car finance option for you?"

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