Personal Contract Hire (PCH) is a form of car leasing for personal users. With PCH, you pay a monthly car lease fee to obtain a new car for an agreed length of time – typically between two and four years. Legal ownership is retained by the finance company that delivers your contract car to your door. At the end of a Personal Contract Hire term, you can either return the car or have it replaced by another vehicle leased with a PCH agreement. In certain circumstances, the finance company will agree to sell you the vehicle in return for a single lump payment.

The benefits to you

With Personal Contract Hire, you can drive a new vehicle for a small upfront payment (typically the equivalent of three months’ repayments) and significantly less each month than you would need to spend on a car bought with a loan. With PCH, you are also exposed to less financial risk, as the lease contract you sign is for the monthly payment across a lease contract term rather than the cost of the entire car. There is a smaller deposit payment required than for a Hire Purchase or loan agreement. Normally, this is equivalent to three months’ payments. With PCH, you don’t need to arrange or negotiate the sale of your old car when you want a new one. You can select the exact trim and colour online for any new car – unlike when you buy a used car from a dealership. Depreciation does not affect your investment in a car, but rather the investment by the finance company. PCH is also cheaper than ownership over the long term if you intend to drive new cars and replace them every few years. You have the option of including all maintenance and services in the monthly price. The road fund licence will always be included for the first year of the lease contract and often over the whole life of the contract. The finance company will send you the tax disc for the windscreen each year. It may be possible to reduce the Benefit In Kind (BIK) tax implications of a company car through paying for a Contract Hire through a car allowance.