How does PCH work?

Leasing a car is effectively long-term rental – you pay a fixed monthly fee to use the car for an agreed time period and number of miles. You may need to pass a credit check to secure your agreement. 

Is PCH right for me?

A personal contract hire (PCH) plan is a form of car leasing where you never own the car.

If you’re not planning to buy the car at the end of a PCP, a PCH might be a cheaper option.

Here’s how PCH works:

1. You may need to pass a credit check and pay a few months’ lease upfront, typically three months’. Although you may pass the credit check, companies might not check whether you can afford the monthly payments. It’s up to you to make sure you have worked out that you can pay what you’re agreeing to. It’s really important that you’ve thought about all your outgoings before you sign any deal and that you’re confident you’ll be able to meet repayments for the full length of the contract.

2. Use the car, sticking to your mileage agreement to avoid extra charges. With a PCH, costs such as servicing and vehicle excise duty (car tax) are included, so you only need to pay for fuel.

3. Keep the car in good condition. Any damage not allowed in your terms and conditions might mean you get extra charges.

    

4. Return the car at the end of the agreement.

If you’re looking to hire a car long term and don’t want to buy it, the cheapest option is likely to be using PCH. Here are the details:

• The lease agreement lasts 2 to 5 years.

• You will need to undergo a compulsory credit check.

• You have to pay around three months’ lease upfront.

• You never own the vehicle during the agreement and have to hand it back at the end of the term.

• Monthly payments are normally higher than for equivalent vehicles leased through PCP, but over the entire contract you’ll typically pay less on a PCH.

• Sometimes you can get a maintenance package that covers things like annual car tax (road tax) or servicing.

• There are strict terms and conditions, like limits to the number of miles you can do.

PCH Q&A

As with all rental agreements, there are some restrictions you need to bear in mind:

• You won’t be able to modify the car in any way – for example, adding a tow-bar – without permission. However, you can ask the leasing company to make modifications before you take it.

• If you exceed the agreed mileage, you’ll have to pay a penalty for the extra miles at the end of the agreement. Typically this is 10p per extra mile and soon adds up, so make sure you estimate your mileage accurately – in 2015, the average household car did 7,900 miles per year. Understand the cost of going over the mileage. It may be cheaper to opt for a higher mileage agreement than pay penalties.

• You must return the car in ‘good repair and condition’ (taking into account ‘fair wear and tear’). So if, for example, a wing mirror gets broken, you might be charged to cover the cost of putting this damage right.

• If you plan on taking your car abroad, you might need to get written permission from the finance company each time you do so and there might also be a charge.

• Ending a PCH early means that you might have to pay off the lease costs in full, so think very carefully before cancelling the agreement and find out exactly what these total costs would be.

Who offers PCH?

Multiple specialist online independent and comparison companies offer PCH deals.