Should you consider a PCH deal for your next car?

Personal contract hire (PCH) is a hugely popular choice among drivers in the UK. It is very
similar to personal contract purchase (PCP) agreements, where you pay a deposit then fixed monthly payments for the agreed contract length.

PCH car finance options

The main difference with PCH is that you are leasing the vehicle and will give it back at the end of the contract, whereas PCP you are paying off the car with the option of ownership.

You may be wondering if personal contract hire is the right option for you – so here we’ll
explain the main pros and cons.

The pros

2. Freedom to change car

If you purchase a car upfront you will own the car immediately, while some finance
agreements involve a ‘balloon payment’ at the end which results in ownership.

Obviously, this ties you to the car and means you’ll have to sell if you want to upgrade – which can be time consuming. PCH takes this hassle away, as you never own the car, you rent it.

This means that you have greater freedom at the end of the contract to change your car if you wish.

2. Lower monthly repayments

Typically, monthly repayments are lower for PCH than they are for PCP. This is because the
amount you pay is not calculated on the upfront cost of the car.

It is usually based on the difference between the initial cost of the new car and the estimated value of the vehicle at the end of your contract.

The other reason it is often cheaper is because certain agreements include maintenance costs and road tax, so you don’t have to pay this separately like you would with the usual purchase of a car.

The cons

1. Tied into full contract

Once you enter into PCH, you have to pay the fixed monthly payment for the entire contract term.

This means that you need to be sure that the car is going to suit your lifestyle for the full length of the agreement, whether that’s two or four years.

If you need to give the car back early, it’s likely you will have to pay the remainder in full or a percentage of what you owe.

2. Mileage cap

When you take out a PCH agreement, you agree to a fixed annual mileage allowance.

This means you need to have a good idea of how far you will be driving and the likelihood of this changing over the term of your contract. If you do go over, you will have to pay a financial penalty.

There may be other restrictions too, such as taking the car abroad, plus charges should you damage the car in any way.

Want to know more about PCH? There are many companies offering great lease deals such as ZenAuto who will be able to give you more information on the options available.