What is Personal Contract Hire?
Personal Contract Hire (PCH) is a popular method of vehicle leasing that offers individuals a convenient and flexible way to drive a new car without the burden of ownership. This type of leasing arrangement has gained traction in recent years due to its simplicity and cost-effectiveness compared to other more traditional methods of purchasing a vehicle outright or through financing.
Understanding how PCH works and its pros and cons can help you make an informed decision when considering your own needs. Good thing the car finance ninjas are on hand to do just that!
What is Personal Contract Hire (PCH)?
Personal Contract Hire (PCH), also known as personal leasing, is a way to access a new car without actually owning it. It’s essentially a long-term rental agreement, typically lasting 2-4 years, where you make fixed monthly payments for the use of the car and then return it at the end of the contract.
It can be a very attractive option for many, as you have fixed monthly payments, maintenance included and you don’t need to worry about selling the car at the end of the agreement.
How does Personal Contract Hire work?
It is a very simple process! You select your new car and then agree on a contract with the lender which includes your initial payment, your fixed monthly payments, mileage allowance and length of the lease.
You then enjoy the car for the duration of the agreement, before simply handing the keys back. Make sure the car is in good condition though, otherwise you could be charged for any damage / excess mileage over your allowance.
What are the Positives of Personal Contract Hire?
If you are thinking about a PCH deal for yourself, then here are some of the benefits of choosing this option:
- Lower Upfront Costs: PCH usually requires a lower initial payment compared to purchasing a vehicle outright.
- Fixed Monthly Payments: You’ll benefit from predictable monthly expenses, making budgeting easier.
- Newer Vehicles Within Reach: PCH often allows individuals to drive a much newer car without the commitment of ownership.
- Flexibility: At the end of the lease term, you can return the vehicle and choose a new model, providing flexibility to adapt to changing needs and preferences.
- Maintenance Options: Some PCH contracts include maintenance and servicing, alleviating the hassle of arranging and paying for these services separately.
What are the Negatives of Personal Contract Hire?
Just like the positives, if you are considering a PCH deal then there are aspects you should consider before going ahead:
- No Ownership: Unlike purchasing a vehicle, with a PCH deal, you do not own the vehicle at the end of the lease term and must return it to the leasing company.
- Mileage Restrictions: PCH agreements typically include mileage limits, and exceeding these limits can result in additional charges.
- Condition Requirements: You are responsible for maintaining the vehicle in good condition, and excessive wear and tear may incur additional fees at the end of the lease term.
- Long-Term Cost: While monthly payments may be lower than financing a purchase, leasing a vehicle over the long term may result in higher overall costs.
- Early Termination Fees: Terminating a PCH contract early may incur significant fees, so you should carefully consider the commitment before signing.
What Alternatives to Personal Contract Hire are there?
There are different routes you can take if you don’t think a PCH deal is for you. For example, a Personal Contract Purchase (PCP) deal allows you to purchase the car at the end of the contract for a balloon payment. You can also just hand the car back at the end of the agreement, similar to a PCH deal.
Should I go for a Personal Contract Hire deal?
Like with any large financial commitment, you should take everything into account before signing anything. You should always carefully read the terms and conditions of your agreement, understand the mileage limits and potential fees, and compare offers from different leasing companies to find the best deal for your needs.
Personal Contract Hire offers individuals a convenient and flexible way to drive a new vehicle without the burden of ownership. However, it’s essential to consider all factors before proceeding.
If you need the guidance of an expert, we have a team of friendly finance ninjas who are trained to guide our customers to the best deal for their individual circumstances and requirements. If you feel Personal Contract Hire is right for you, come to the car finance ninjas and we can guide you to the best deal!
