Personal contract hire

With Personal Contract Hire (PCH), you lease a car for a fixed period, pay an initial rental fee, and enjoy full use of the vehicle throughout the term - then simply return it at the end.

What is personal contract hire?

Personal Contract Hire (PCH) is a type of car leasing that lets you drive a new vehicle without the commitment of ownership. It’s a long-term rental agreement where you make fixed monthly payments to use the car for an agreed period - typically 2 to 4 years.

At the end of the contract, you simply hand the car back. No stress about selling, no worries about depreciation. It’s a popular option for those who want a new car every few years and like keeping costs predictable.

If you prefer using a car over owning one, PCH might be the right fit.

How does personal contract hire work?

You choose the car you want to lease

Find the vehicle that suits your budget and lifestyle from the options provided by the lender or dealership.

You agree on the contract length

Usually between 24 and 48 months. Shorter contracts offer more flexibility, while longer terms can help reduce monthly payments.

The loan term is usually between one and five years, and you'll make fixed monthly payments for the duration of the loan.

Set your annual mileage limit and make an initial rental payment

Mileage limits help determine your lease cost - exceeding them may result in additional charges.

Pay fixed monthly amounts

You'll make fixed monthly payments to the lender for the duration of the lease. The payments will include interest, so the longer the loan term, the more you'll pay in interest.

At the end of the term, return the car

Once you make the final payment you simply return the car, no balloon payment or selling is involved.

You choose the car you want to buy and agree on a deposit

The deposit amount is typically around 10% of the car's value, although this can vary depending on the lender and your credit score.

You agree on the loan term and monthly payments

The loan term is usually between one and five years, and you'll make fixed monthly payments for the duration of the loan.

The lender buys the car and you take possession

The lender buys the car and owns it until you make the final payment on the loan.

You make monthly payments

You'll make fixed monthly payments to the lender for the duration of the loan. The payments will include interest, so the longer the loan term, the more you'll pay in interest.

You own the car once the loan is paid off

Once you make the final payment on the loan, you'll own the car outright if you choose to pay the option to purchase fee.

Benefits of personal contract hire

There are several advantages to choosing a PCH agreement over other car finance options such as hire purchase (often referred to as HP) and personal contract purchase (also known as PCP). These advantages include:

PCH agreements are typically shorter than other forms of finance so if you like to drive the latest models, PCH enables you to upgrade more often.

Monthly payments can be lower than other forms of finance as you're not paying off the cost of purchasing the car, just the usage during the lease.

At the end of the agreement, assuming the car is in good condition and within the agreed mileage, there's no final 'balloon payment' or selling involved. You simply return the car.

Considerations of hire purchase illustration

Personal contract hire considerations

PCH might be a good financial fit for you, or it might not be – it all depends on your personal circumstances. There are a few considerations when deciding whether PCH is the right finance option for you:

There's no option to buy the car at the end of the lease.

If you exceed the mileage limit in your agreement you could incur extra charges.

If you're not able to keep up with the monthly repayments the vehicle may be at risk of being repossessed.

What is the best car financing option for you?

Personal car loan

Personal Contract Purchase

Hire purchase

Personal contract hire

Typical length of agreement:

Typical length of agreement

Typical length of agreement:

Usually 1-7 years

Usually 1-5 years

Usually 1-4 years

Initial deposit required?

Usually but not always

Who owns the car?

You, although you will still need to repay the debt

The lender or finance company unless an optional final balloon payment is made

The lender or finance company until final repayment plus option-to-purchase fee is made

The lender or finance company, always

Mileage restrictions

Yes

Sometimes

Yes

FAQs about personal contract hire

Can I end a PCH agreement early?

It's possible to end a PCH agreement early however you might be subject to an early termination fee. It's important to be clear on the terms of your contract so there are no unexpected fees if you decide to end your PCH contract early.

What happens at the end of a PCH lease?

Simply return the car. If it's within the mileage limit set out in the terms of your agreement and in good condition, there’s nothing more to pay. You're free to walk away or, if you prefer, lease another vehicle.

Are maintenance costs included in a PCH agreement?

Sometimes. Some PCH deals include maintenance packages - reducing additional expenses. Be sure to confirm what's included before you sign your agreement.

Can I lease a used car on PCH?

Yes, it's possible to lease a used car and you may find that a used car will have lower monthly a payments than a new car. However, PCH is typically for new or nearly-new cars so it may be difficult to find a dealer offering used cars available to lease.