Personal Contract Hire (PCH) Finance Guide

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PCH Car Finance Explained

If you want to drive a new car every few years, Personal Contract Hire could be a great option for you. A PCH is way of paying a monthly rental for a New vehicle rather than purchasing it and is available on terms between 24 to 60mths.  At the end of the agreement you just hand the vehicle back to the finance company with no more to pay subject to mileage and condition.

With PCH, you never actually own the vehicle. Service and maintenance costs can sometimes be added to your monthly rental which can help make the overall costs more manageable, and when it’s time to change your car you simply hand it back to the finance company - meaning there’s no hassle with respect to selling it.  You also don’t need to worry about the drop in value, as your monthly payments are fixed and not subjected to fluctuations in the car industry.

An initial rental is needed, typically this is between 1 to 12 of your monthly rentals, but can also be a lump sum payment. The higher the initial amount, the lower the remaining monthly rentals. You’ll make the monthly rental payments until you reach the end of the agreement, when the finance company collects the vehicle and checks the condition and mileage. If you have gone over the expected mileage or if there is any damage to the vehicle, then you are likely to be charged.


What are the benefits of PCH?

PCH is a fixed cost rental agreement, available on selected new vehicles only. 

Step 1: Decide your annual mileage limit. The minimum and maximum limits may vary by vehicle.

Step 2: The monthly rentals are determined by the overall vehicle price, the initial rental paid, the agreement term, the rate of VAT and your annual mileage.

Step 3: When your agreement comes to an end you must return the vehicle to the finance company as there is no ownership option.

Initial payment -
An initial rental is needed. Typically this is between 1 to 12 of your monthly rentals but can also be a lump sum payment. The higher the initial amount, the lower the remaining monthly rentals.

Ending your agreement early - If you wish to end your agreement early and return your vehicle, early termination charges will apply. Early termination can be expensive.

Fixed Monthly rentals -
Pay monthly rentals over the agreed term, typically between 24 and 60 months. VAT and Vehicle Excise Duty are charged at the prevailing rate and may vary during the agreement.

End of agreement - At the end of your agreement you must return the vehicle to us as there is no ownership option. If you have not exceeded your contracted mileage and have kept your vehicle in good condition (in line with the BVRLA Fair Wear and Tear guidelines) you should have nothing further to pay. You will incur charges if the vehicle is not returned in good repair and condition and/or you have exceeded the contracted mileage

Maintenance – An optional maintenance package can normally be included which can help with keeping your vehicle in good condition. Please ask for details.

Here are some other important factors you need to consider:

Affordability - You should carefully consider your ability to make the repayments without difficulty during the agreement. You should only proceed if you are satisfied that the repayments are affordable and you are NOT aware of or expect any significant changes to your income or expenditure during the length of this agreement.

Consequences of not keeping up with repayments - If you do not keep up with your repayments, late payment interest and other default charges may become payable. Any missed payments will be reported to credit reference agencies, which may make it more difficult and expensive for you to obtain credit in the future. If missed payments are not repaid, in some cases the lender may take legal action to recover these.

You must:

  • keep the vehicle in good repair & condition and service as per manufacturer’s recommendations  
  • keep the vehicle in your possession and control, and not sell it
  • insure the vehicle with full comprehensive cover

You must not:

  • take the vehicle abroad (except to the EU for a maximum of 30 continuous days / 60 days a year)
  • alter the vehicle or use it for racing
  • make the agreement on behalf of someone else
Credit Footprint – Like all applications for credit, applying for dealer finance will leave a record on your credit file. 

The right of withdrawal - 
For HP & PCP agreements, if you are a private individual, sole trader or small partnership borrowing no more than £60,260, you will have the right to withdraw during a period of 14 days starting the day after the day on which you sign the agreement. To withdraw, you must give the lender written or oral notice within the withdrawal period.