Suitability Explanation - A Customer-Friendly Guide to your Personal Contract Hire
What is Personal Contract Hire (PCH)?
Personal Contract Hire (PCH) is mileage based agreement for the hire of a car for a fixed term usually between 2 and 5 years. You won't own the vehicle, and selling it isn't an option. The deal involves an initial rental payment, followed by fixed monthly rentals for the chosen hire period. At the end, you return the vehicle to the leasing company.
Is PCH Right for You?
Yes, if you want a new car without the long-term ownership commitment but it won’t be a good fit if
- You want to own the vehicle as it’s a rental and returned to the finance company as the end of the contract
- Predicting your mileage is a challenge as it’s based on a pre-determined mileage which you choose
- You might need to end the lease early as terminating prematurely is costly
- You want to shorten the hire term by pre-paying
- You want to use it abroad extensively as there are restrictions
Benefits of PCH:
There’s lots of good plus points to PCH
- Low initial cost, fixed monthly rental payments to suit you
- You choose the term of the lease (2-5 years) and mileage
- You can change the mileage if your mileage requirements change (check with us how frequently and when you can do this if this is important to you)
- Optional service, maintenance and repair plans for easy budgeting
- Road tax at the current rate is included during the lease, but if road tax increases during the contract the finance company will charge you the difference
- No concerns about depreciation and disposal values
Responsibilities and Care:
- Comprehensive insurance is a must
- Prompt payment of fines and charges as if the bill lands with the funder, they’ll make an additional charge for their administration
- Your rentals include vat so if the rate of vat changes, your rentals will change to reflect this
- Service and maintain the vehicle according to the Manufacturer’s recommendations and keep it roadworthy. Use of genuine Manufacturer parts is a must and some funders require you to service and maintain at a main franchised dealer. Please check the terms and conditions of your finance agreement. If you fail to properly service and maintain the vehicle the funder will make a charge when its returned to them as this will affect its value. It’s worth exploring a cost effective service, maintenance and repair package for predictable costs but do bear in mind that the maintenance provider may decline to settle any charges if the total contract mileage is exceeded.
- Extra charges for exceeding mileage or missing items, such as both sets of keys, at return
- Non-payment may lead to contract termination and vehicle repossession.
Important Reminder:
- Only commit to a PCH if you’re comfortable with the financial terms
- Make sure that you fully understand the agreement before entering into it
In a nutshell, PCH allows you to drive a new vehicle for a fixed cost and relieves the hassle of ownership and future disposal, but it comes with responsibilities.
Failure to make payments in full and on time may result in the contract being terminated and the vehicle repossessed. Only enter in to an agreement if you are comfortable with the financial commitment and terms.
