With personal contract hire, you never own the car and cannot buy it at the end. Exceeding the mileage limit or returning the car below the required condition standard will result in additional charges. Early termination of a PCH agreement typically involves significant penalty costs.
Quick answer
PCH lets you drive a new car without buying it or committing to purchase it at the end. You pay an initial rental upfront and fixed monthly payments. At the end, you return the car. It is the most straightforward car finance option if you simply want to drive a specific car for a set period with a predictable monthly cost and no residual ownership responsibility. The key constraints are mileage limits and condition requirements at return.
The Appeal of PCH
- Fixed monthly cost: No depreciation risk - the lease company absorbs the car's value change. You pay a calculated amount for using the car.
- Always in a new car: At the end of each agreement, you start fresh with a new model.
- Manufacturer warranty coverage: For most lease terms (2 to 4 years), the car is within its new vehicle warranty, reducing mechanical cost risk.
- Optional maintenance bundles: Convert servicing and tyre costs into a predictable monthly figure.
The Limitations of PCH
- You build no asset value over time - everything paid is a cost
- Mileage is strictly limited; exceeding it is charged at a premium rate
- Condition requirements at return mean you must maintain the car to BVRLA standards
- Early termination is costly and complex
- You cannot make significant modifications to the vehicle
PCH vs PCP: Which Is Right for You?
If you know you want to drive a car temporarily, return it, and never commit to ownership - PCH is the cleaner option. If you are uncertain, or if you might want the option to buy, PCP gives you that flexibility at the cost of slightly higher monthly payments.
Initial Rental
Most PCH deals require an initial rental (sometimes called an advance rental), typically equivalent to 3, 6, or 9 monthly payments. A higher initial rental lowers subsequent monthly payments. This is not a deposit against the car's value - if the car is written off on day one, the initial rental is not refundable. Some gap products cover this risk.
Frequently Asked Questions
PCH is essentially long-term car rental. You pay an initial rental (typically equivalent to 3 to 9 months' payments, collected upfront), then make fixed monthly payments for the agreed term (usually 2 to 4 years). At the end, you simply return the car - there is no option to buy it. It is the purest form of "use without ownership" car finance. PCH is regulated as a form of consumer hire under the Consumer Credit Act.
No. PCP (Personal Contract Purchase) has a balloon payment (GFV) at the end and gives you the option to buy the car. PCH (Personal Contract Hire) has no purchase option at all - you are contracting to hire the car and must return it. PCP monthly payments may be slightly higher than equivalent PCH payments because PCP includes an inherent purchase option. If you are certain you never want to own the car, PCH may be the slightly cheaper accessible option.
It depends on the package. Many PCH deals are available with an optional maintenance package that bundles in servicing, tyres, and sometimes MOTs at an additional monthly cost. This converts the bulk of your car running costs into a predictable single payment, which suits those who prefer cost certainty. Maintenance packages increase the monthly cost but provide budgeting simplicity.
PCH agreements specify an annual mileage limit set at the start of the contract. If you return the car having exceeded the agreed mileage, you pay an excess mileage charge per mile (typically 3p to 15p depending on the vehicle and agreement terms). Setting the mileage too low brings a lower monthly payment but risks excess charges. It is better to be slightly generous with your mileage estimate - excess charges at the end are rarely good value versus buying the extra miles upfront.
Early termination of PCH agreements can be expensive. Unlike HP and PCP, which have statutory voluntary termination rights under the Consumer Credit Act at the 50% threshold, PCH as a consumer hire agreement has different (and generally less favourable) statutory early exit rights. Some agreements allow early termination with a penalty calculated on remaining rentals. Read the early termination terms carefully before signing - PCH should only be entered if you are confident about the full term.
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