Personal Contract Hire (PCH) Factsheet

Please see the finance agreement terms and conditions for full details

Ideal for: People who want fixed monthly repayments without the option to own the car.

Personal Contract Hire, or PCH, is also commonly known as 'leasing'. Leasing gives you the chance to drive a new car every few years, with relatively low monthly payments and no worries about the car's resale value. 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. Under a PCH agreement, you never own the vehicle and you have to hand it back at the end of the term.

At the Beginning of the Agreement

Under a PCH agreement, you usually have to pay three months' rental in advance. However, this may vary according to the leasing company. The leasing Company may charge an administration fee to set up the agreement (see the agreement for details).

During the Agreement

You'll make fixed monthly payments in accordance with your PCH agreement. As with all rental agreements, there are some restrictions you need to bear in mind:

  • If you cancel your contract and return the car early you'll probably have to pay an early termination fee, or may even be liable to pay all the outstanding rental payments.
  • 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 this additional mileage at the end of the agreement. Please see the agreement for full details of any such penalty charges.
  • If you plan on taking your car abroad, you may need to get written permission from the finance company each time you do so and there may also be a charge.

At the End of the Agreement

You have no right to purchase the car and become its legal owner. If you want the option of owing the car at the end of the agreement, PCH is unlikely to be a suitable finance option for you. At the end of the agreement you must instead return the car to the leasing Company in "good repair and condition" (taking into account "fair wear and tear"). So if, for example, your dog scratches the car, you may be charged to cover the cost of putting this damage right. If you have exceeded the agreed mileage, you'll also have to pay a penalty for this additional mileage at the end of the agreement (see the agreement for full terms and conditions).

Advantages of Personal Contract Hire

  • Low, fixed, monthly payments that often work out to be less than Personal Contract Purchase agreements.
  • Your monthly payments will normally include the cost of annual car tax. You may also have the option of including a maintenance package to cover the costs of routine servicing. With PCH you don't have to worry depreciating value, warranty expiry, or selling it on – that's for the leasing company to consider.
  • At the end of the agreement you have the freedom to change supplier. You're free to start leasing a new car from the same company or shop around for a better deal elsewhere.

Things to Remember

  • As a PCH is a form of hire agreement without an option to buy at the end of it, the leasing company will actually own the car throughout. You must therefore have fully comprehensive insurance for the term of the agreement.
  • Without an option maintenance package, you are responsible to maintaining the car in accordance with the manufacturer's warranty and servicing schedule. The leasing Company may stipulate where servicing and the replacement of tyres must be carried out.
  • Be careful how you estimate your annual mileage as you'll be charged for each additional mile when you return the car.

The vehicle may be repossessed if you do not keep up the repayments and you may also incur additional charges and costs. Thinking carefully about your circumstances, you should ensure that the repayments are affordable now and for the duration of the agreement. You are not obliged to make use of a finance agreement arranged by Jennings Motor Group.

You can find out more about this, and other finance options, at www.moneyadviceservice.org.uk