Complete Guide to Personal Contract Hire
Getting behind the wheel of a new car can be an expensive process so how you decide to finance a vehicle is an important decision. There are now more ways than ever to help you drive away in a brand new car.
Leasing is becoming an increasingly popular choice with personal contract hire quickly becoming the most common form of leasing. But what exactly is personal contract hire and what benefits does it offer you? Keep reading to find out more.
What is Personal Contract Hire?
Personal contract hire is similar to other contract hire agreements the main difference being that it only applies to an individual and not businesses, which is why it is also known as personal leasing.
Essentially if you decide to lease a vehicle, you are renting the vehicle from the lease company. This means once your lease is up, you can either return the car and walk away or start a new personal lease agreement.
This is different to Personal Contract Purchase, where you make a balloon payment at the end of the monthly payments to keep the car.
With leasing you get to choose which car you hire, the terms of your lease agreement and even how long you lease the car for. It is a cost-effective way of motoring, so it is not surprising that it is becoming a popular choice. The lease period and mileage are agreed at the start of the contract, with you making fixed monthly payments until the end of the contract.
It is important to remember that although the car is in your possession for the lease period, you do not own it. Therefore it is important you keep the car in a good condition. The leasing company will expect some wear and tear, but anything over this may result in you facing extra charges. This is because while you do not need to worry about depreciation, the leasing company do.
When you lease a car via personal contract hire, it is often possible to also take a maintenance and service package on the vehicle. This means you don’t need to worry about unexpected motoring costs cropping up and is ideal for people who want completely hassle-free motoring.
What Are The Benefits Of Personal Contract Hire?
PCH vs PCP
So you’ve probably heard of PCP - Personal Contract Purchase - but how does it compare to PCH and what are the differences?
If you get a PCP deal you will usually be expected to find a deposit, which could be up to 40%. A PCH deal doesn’t require a deposit, but you will need to put down a rental fee.
Monthly payments are usually lower with a PCP deal than with HP as you are paying a percentage towards the car, rather than the full value. PCH instalments are usually lower than they would be to buy the car, which means that you could afford a higher quality car.
Terms of the Agreement
A PCP deal will usually be over 2-4 years although it is often possible to end the agreement early. A PCH deal will typically be over 3 or 4 years. Again you can usually cancel early but you should expect to pay some cancellation charges.
Whether you go for a PCP or PCH deal, mileage limits are agreed at the beginning of the contract and you will be charged a set pence-per-mile fee for every mile you go over the agreed limit.
If you want to own the vehicle at the end of a PCP deal you’ll need to pay the balloon payment. There is no balloon payment with a PCH deal.
Ownership Status at End of Agreement
If you make the final balloon payment at the end of a PCP deal you will own the car. There is no option to purchase the car at the end of a PCH deal.
Are you tied into the agreement?
PCP deals do tend to be fairly flexible so you could possibly end the contract early or swap for a different car part way through the term. You are however tied into a PCH deal and if you want to end the agreement early you should be prepared to pay a cancellation fee.
Does it include maintenance?
It is often possible to include maintenance in both a PCP and a PCH deal. You should ask your dealer for more information.
Wear & Tear
Whether you choose a PCP or PCH deal you will be expected to return the car at the end of the agreement with minimal wear and tear. If the car is deemed to have excessive wear and tear then you may be asked to pay additional charges.
What about insurance?
Whether you go for a PCP or PCH deal you will be expected to take out full comprehensive insurance.
Am I eligible for a personal contract hire deal?
If you’re interested in getting a car via personal contract hire it is important to make sure you qualify. Just like with a loan, to be eligible for personal contract hire there are a few basic requirements.
In order to qualify for Personal Contract Hire you must:
It’s also important that you make sure you can afford the monthly payments before you commit to the contract. Remember ending the contract early can result in you having to pay additional charges.
If after reading this guide you’re confident that leasing is the best way to for you to get behind the wheel of a brand new vehicle, then why not check out our current leasing deals?
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