PCH
Personal Contract Hire (PCH) allows you to drive a brand-new vehicle over an agreed period of time and mileage for a fixed monthly payment. This gives you cost-effective access to new a vehicle without the deprecation costs normally associated with owning a new vehicle outright. You also have the option to include vehicle service maintenance and repairs in a maintenance rental, which means you can budget predictably for all your motoring costs.
At the end of your personal contract hire agreement, the finance company will contact you to arrange the return of the vehicle. There is no option to purchase the vehicle at the end of your term, but you can simply replace it with another one. The vehicle will be inspected prior to being collected and returned to the leasing company in a condition that meets the BVRLA ‘Fair wear and tear’ guidelines, otherwise charges may be incurred for damage and excess mileage. When purchasing your vehicle be sure to discuss your options with the dealer or broker if anything is unclear, and to make sure you choose the best option for you.
The benefits of Personal Contract Hire
- Drive a new vehicle with low monthly repayments
- Flexible terms from 24 to 60 months
- Road Fund Licence is included
- The option to include vehicle maintenance within the rental
- You can budget predictably for all your motoring costs
PCP
Personal Contract Purchase, or PCP, allows you to drive a new or used vehicle over an agreed period of time deferring the final payment – known as the balloon payment. This deferred sum is usually based on a number of factors including how old the vehicle will be at the end of the agreement and how many miles it is expected to have covered.
Deferring the Balloon payment to the end of the agreement in this way means that your regular monthly payments are lower than those on a comparable HP agreement over the same term. A PCP agreement also gives you the flexibility to decide whether you would like to own the vehicle outright at the end of the agreement by paying the balloon payment or returning the vehicle to the lender and entering into a new vehicle finance agreement. When purchasing your vehicle be sure to discuss your options with the dealer or broker if anything is unclear, and to make sure you choose the best option for you.
The benefits of Personal Contract Purchase
- Drive a new or used vehicle with low monthly payments
- Little or no initial deposit
- Reduced monthly payments due to the deferred GFV
- Fixed interest rates for the duration of the contract
- Fixed cost motoring for the duration of the contract
- No risk of negative equity – GFV guaranteed by lender
- An option to own the vehicle at the end of the contract – just pay the Balloon payment
- Fixed cost maintenance packages available
- Gap insurance available
The difference between PCP and PCH
With both PCP and PCH you pay an amount up-front, followed by fixed monthly payments. With PCH you must hand the vehicle back at the end of the contract, but with PCP it offers ownership at the end of the agreement by making the final balloon payment. When purchasing your vehicle be sure to discuss your options with the dealer or broker if anything is unclear, and to make sure you choose the best option for you.
Hire Purchase
Hire Purchase (HP) is a type of finance that allows you to buy a vehicle outright without having to pay the whole amount upfront and with no large final payment as is the case with Personal Contract Purchase (PCP finance). The cost is split across a deposit and a series of fixed monthly instalments, typically spread over two to five years. You automatically own the vehicle as soon as you've made the final instalment.
While PCP finance involves lower monthly payments for the same vehicle (assuming the same deposit and contract length), drivers looking to own the car at the end of the contract will pay less overall with Hire Purchase. Drivers also don't have to find a substantial chunk of money to pay a very large final payment - known as a balloon payment which is needed to own the car with Hire Purchase as they would with PCP. When purchasing your vehicle be sure to discuss your options with the dealer or broker if anything is unclear, and to make sure you choose the best option for you.
Benefits of Hire Purchase
- Spread the cost of the car across monthly payments
- Interest typically charged less than with PCP equivalent
- No large balloon payment as with PCP if purchasing the car
- Available on new and used cars alike
