Personal Contract Hire (PCH) Explained

Personal Contract Hire is the standard form of personal car leasing in the UK. You drive a brand new vehicle for a fixed monthly payment over an agreed period, usually two to four years, and hand it back at the end rather than buying it.

You pay to use the car rather than to own it, which is why the monthly figure covers the vehicle's depreciation over the term rather than its full price. At the end it goes back to the finance company, provided it is within the agreed mileage and meets fair wear and tear standards, and you can then choose another from the latest car leasing deals.

You choose the car, agree a contract length and an annual mileage allowance, pay an initial rental at the start and then fixed monthly rentals for the rest of the term. At the end you return the vehicle.

The payments cover the car's depreciation over the agreement rather than its purchase price, which is why the monthly figure is usually lower than financing the same car to own it. The term and mileage are both fixed once you sign, so those two decisions matter more than any other part of the process.

No. The car belongs to the finance company for the whole of the agreement and goes back to them at the end. You are the registered driver, not the owner or the registered keeper.

This is why road tax is included in your rental, why the V5C sits with the funder, and why you need their permission in the form of a VE103 certificate to take the car abroad. If owning the car at the end matters to you, PCP or hire purchase are the products built for that.

The vehicle for the agreed term, the manufacturer warranty and road tax for the duration of the contract. A maintenance package covering servicing, tyres and MOTs where required can be added as an option.

Insurance is not included and you arrange your own fully comprehensive cover before delivery. Routine servicing, tyres and other wear items are also yours unless you add maintenance, along with fuel or charging, fines and tolls.

The car is collected and inspected, and if it is within the agreed mileage and meets fair wear and tear standards, the agreement simply ends with nothing more to pay. The finance company contacts you in advance to arrange a date.

The condition is recorded on a report you sign at collection, and any charge is raised afterwards rather than settled on the day. Many drivers then move straight into a new agreement using the latest special lease offers. Our guide to returning a leased car covers the preparation in detail.

Usually yes on the monthly payment, and often no on the total cost over many years. The rentals cover only the car's depreciation over the term rather than its full price, which is what makes the monthly figure lower than financing a purchase.

The picture reverses over a longer horizon. Buy a car and keep it well past the point where the finance is repaid and you eventually stop paying altogether, which a lease never does. Leasing tends to win for drivers who change car every few years, and buying tends to win for drivers who keep one for a decade. Our leasing versus buying guide works through the comparison properly.

There is no automatic right to. PCH is a fixed term rental agreement, and the voluntary termination right under the Consumer Credit Act, which lets someone hand a vehicle back once a set proportion has been paid, applies to PCP and hire purchase rather than to contract hire.

Where a funder does allow an early exit it is at their discretion and settled against a figure they quote, typically a large proportion of the remaining rentals, and some funders do not offer it at all. Choose your contract length and mileage carefully at the outset, and if you are already in an agreement and need to know where you stand, speak to your funder directly.

Yes, and it is one of the most popular ways to run an EV in the UK. Handing the car back at the end means you never have to work out what a used electric car will be worth, which is the part of EV ownership drivers find hardest to judge.

You can compare the latest electric car leasing deals to see the models available. The battery is covered by the manufacturer's separate battery warranty, which on most brands runs longer than a typical lease.

Personal Contract Hire. It is the personal version of contract hire, the standard leasing agreement used in the UK, and the business equivalent is Business Contract Hire, or BCH.

The two work almost identically. The main differences are that personal rentals are quoted including VAT while business rentals are quoted excluding it, and that the tax treatment differs for a business. If you see PCH on a listing, it simply means a personal lease.

Yes, for practical purposes. When someone talks about leasing a car personally in the UK, they almost always mean Personal Contract Hire, and the terms are used interchangeably on listings and comparison sites.

Leasing is the broader word and covers a few other arrangements, such as Business Contract Hire and finance lease, which are different products for different customers. But a personal lease deal advertised to a private individual is a PCH agreement.

There is no deposit as such, but you normally pay an initial rental at the start. It is the first payment of the contract rather than money held against the car, so it is not refundable and it buys you no stake in the vehicle.

The initial rental is quoted as a multiple of the monthly rental, and the two move against each other. Pay more upfront and the monthly figure drops, pay less and it rises, while the total across the agreement changes far less than people expect. If the upfront amount is the obstacle, our low deposit lease offers are worth comparing.

No. You arrange your own insurance and it must be fully comprehensive, in place before the car is delivered, because the finance company owns the vehicle and requires that level of cover.

Tell your insurer the car is leased and that the finance company is the registered keeper, as they will ask for both. Third party or third party fire and theft cover is not acceptable on a leased car.

Yes. Every PCH application is credit assessed, because it is a finance agreement, and the decision is made by the funder rather than by the broker arranging it.

Funders look at your overall position rather than a single score, including credit history, address history and income against the commitment, and different funders take different views of the same application. Being registered on the electoral roll and having a settled address history both help.

No. There is no purchase option built into a Personal Contract Hire agreement, because the car belongs to the finance company throughout and the whole structure is built around it coming back to them.

If having the option to buy at the end matters to you, PCP is the product designed around exactly that, with a final balloon payment you can choose to make. It usually costs more per month than the equivalent PCH for the same car.

You pay an excess mileage charge for every mile over the allowance, at a rate written into your agreement before you sign. Because the rate is fixed and known in advance, you can work out where you stand at any point in the term.

Choose the allowance honestly at the outset rather than picking a low figure to improve the quote, since you pay for those miles either way and the excess rate is usually the more expensive route. If you can see part way through that you will exceed it, speak to your funder, as some will consider adjusting the agreed mileage.

Anyone who might need to end the agreement early, anyone who wants to own the car or have something to trade in at the end, and anyone whose annual mileage is genuinely unpredictable. PCH handles none of those well.

It also suits you less if you keep cars for a very long time, because the strength of leasing is regular replacement rather than long ownership. If your circumstances are settled, your mileage is reasonably predictable and you like changing car every few years, it is a strong fit. If two or more of those are not true, look at PCP or at buying instead.