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Personal Contract Hire Explained

In this article, we will explain what a Personal Contract Hire (PCH) agreement is and provide you with all the information you need to decide whether it’s the right option for you.

Personal Contract Hire Explained

Holly Jenkinson

Published: 10 May 2023

Updated: 10 May 2023

Read time: 5 minutes

In this article, we will explain what a Personal Contract Hire (PCH) agreement is and provide you with all the information you need to decide whether it’s the right option for you.

What is Personal Contract Hire (PCH)?

A Personal Contract Hire (PCH) is a lease contract that is typically seen as the most ‘hassle-free’ type of car finance available. The deal normally lasts 3-4 years, needs an initial rental, and tends to have lower monthly payments. At the end of the contract, you will hand the car back to the dealer.

Personal Contract Hire (PCH) is perfect for:

- If you want to change your car every 3-4 years
- If you want to hand the car back at the end

PCH Terms Explained

Term

What you need to know

Lease

An agreement between the customer and dealer where the car is being leased to you for a set period of time. You cannot own the car on a Lease contract.

Duration of Agreement

The total duration of your agreement in months.

On the Road Price/
Cash Price

The total amount your vehicle is worth if you were to purchase your vehicle outright.

Initial Rental

The initial rental is an upfront cost and is typically 6x the amount of your monthly payment. For example, if your monthly payment is £99 per month, the initial rental will be £594.

XX Monthly Payments

The amount you pay per month of your finance agreement. Throughout the contract your monthly payments will be on lease contract basis, and therefore tend to be lower than other finance contracts such as a HP.

Miles per Annum

Your contract will have an estimated mileage per year, e.g. 6,000 miles per year (24,000 miles over a 4 year contract). The estimate is used to work out the likely future value of your vehicle at the end of your agreement. As long as you do not drive more than 24,000 miles, there will be no mileage charges at the end of your contract.

Excess Mileage Charge

The amount in pence per mile that you will pay for any exceeded mileage.

Advantages of PCH

  • PCH is hassle-free – you just hand the car back at the end
  • The monthly payments tend to be lower than other types of finance
  • There’s no risk of depreciation
  • You can include service and maintenance costs within your monthly payments if you want to

Things to consider

  • There is no option to purchase the car at the end
  • If you have exceeded your contracted mileage when handing the car back, excess mileage charges will apply

We hope that this car finance guide was useful. If you still have questions, we’re on hand to help, find your local dealership here. We currently have car finance offers available on a wide range of cars – take a look today.

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Representative finance example: Personal Contract Purchase (PCP)

Representative APR%
9.90% APR 		 First Payment
£249.71		 46 Monthly
payments of
£249.71		 Optional final
payment
£9,090.00		 On the road
price
£20,000.00		 Term of
agreement
48 months		 Customer deposit
£4,000.00
Amount of credit
£16,000.00		 Cost of credit
£4,826.37		 Annual mileage
5,000		 Excess mileage
8.4p		 Total amount
payable
£24,836.37		 Fixed rate of
interest
9.90%		  
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