Personal Contract Hire (PCH) Explained

Personal Contract Hire (PCH) is a way for private individuals to lease a car for an agreed period and mileage without purchasing the vehicle.

You normally pay an initial rental, followed by fixed monthly rentals for the duration of the agreement. At the end of the contract, the vehicle is normally returned to the finance provider, subject to the agreed mileage, vehicle condition and terms of the agreement.

With PCH, you do not own the vehicle and there is normally no option to purchase it at the end of the agreement.

How Does Personal Contract Hire Work?

A Personal Contract Hire agreement is based around several key choices:

The vehicle you want to lease.
Contract length.
Annual mileage.
Initial rental.
Monthly rental.
Whether you want to include a maintenance package.

The finance provider uses these and other factors to calculate the monthly rental.

Once the agreement begins, you make the agreed monthly rentals and use the vehicle for the contracted period.

At the end of the agreement, the vehicle is normally returned to the finance provider.

What Is an Initial Rental?

The initial rental is the first rental payment made as part of your PCH agreement.

It is not a deposit towards ownership of the vehicle.

PCH quotations are often shown using profiles such as:

1+35
3+35
6+35
9+35
12+35

For example, on a 3+35 agreement, the initial rental is equivalent to three monthly rentals, followed by 35 regular monthly rentals.

A larger initial rental will generally reduce the following monthly rentals, but it does not give you any ownership of the vehicle.

Always compare the overall cost of the agreement, rather than looking only at the advertised monthly rental.

How Long Does a PCH Agreement Last?

Personal Contract Hire agreements are available for different contract lengths depending on the vehicle and finance provider.

At Applied Leasing, contract terms are commonly available between 24 and 60 months, although availability varies by vehicle and finance provider.

When choosing a term, consider how long you expect to need the vehicle and whether your circumstances could change during the agreement.

How Much Mileage Can I Choose?

Your annual mileage allowance is agreed when the lease is arranged.

The appropriate mileage depends on your driving requirements and the finance provider's available contract options.

It's important to choose a realistic mileage allowance.

If you exceed the total contracted mileage, the finance provider may apply an excess mileage charge when the vehicle is returned.

If your driving requirements change during your agreement, contact us or your finance provider to find out whether the mileage allowance can be amended. This will depend on the agreement and finance provider.

What Is Included in Personal Contract Hire?

What is included will depend on the specific agreement.

A typical PCH rental covers the use of the vehicle for the agreed contract period and mileage.

Depending on the agreement, other items may be included or available separately, such as:

Vehicle Excise Duty during the lease, subject to the terms of the agreement and changes in taxation.
Optional maintenance packages.
Servicing and maintenance where a maintained contract has been selected.
Breakdown assistance where included within the relevant maintenance or manufacturer package.

Always check the quotation and finance documentation carefully to understand exactly what is included.

Is Insurance Included With PCH?

Normally, vehicle insurance is not included with a standard Personal Contract Hire agreement.

You will usually be responsible for arranging and maintaining fully comprehensive insurance for the vehicle throughout the agreement.

Check the requirements of your individual finance agreement before taking delivery.

Who Owns a PCH Vehicle?

The vehicle is owned by the finance provider or relevant leasing company during the Personal Contract Hire agreement.

You are paying for the use of the vehicle rather than purchasing it.

This is one of the main differences between PCH and vehicle finance products designed to provide an option or route to ownership.

Can I Buy the Car at the End of a PCH Agreement?

PCH is designed as a vehicle hire agreement rather than a purchase agreement.

There is normally no contractual option to purchase the vehicle at the end of a Personal Contract Hire agreement.

If owning the vehicle at the end is important to you, another type of vehicle finance may be more appropriate.

Personal Contract Hire vs PCP

Personal Contract Hire (PCH) and Personal Contract Purchase (PCP) are different types of vehicle agreement.

With PCH:

You lease the vehicle.
You pay an initial rental and monthly rentals.
You agree a contract term and mileage.
You normally return the vehicle at the end.
There is normally no option to purchase the vehicle.

With PCP:

You make payments under a vehicle finance agreement.
The agreement normally includes a Guaranteed Future Value or optional final payment.
You may have the option to purchase the vehicle at the end by making the required final payment and satisfying the terms of the agreement.

If vehicle ownership is important to you, make sure you understand this distinction before choosing an agreement.

What Are the Benefits of Personal Contract Hire?

PCH may be suitable for customers who want:

Predictable monthly vehicle rentals.
Access to a new car without purchasing it outright.
A choice of contract lengths and mileage allowances.
The option to include maintenance on eligible agreements.
No need to sell or part-exchange the vehicle at the end of the agreement.
The ability to change to another vehicle after the contract ends.

However, suitability depends on your individual requirements and financial circumstances.

What Should I Consider Before Choosing PCH?

PCH will not be suitable for everyone.

Before entering into an agreement, consider whether:

You want to own the vehicle.
Your annual mileage is reasonably predictable.
You are comfortable making the required payments for the full contract.
Your circumstances may change during the agreement.
You understand potential early-termination costs.
You are comfortable with the vehicle return requirements.
You understand potential excess-mileage and damage charges.

You should only enter into an agreement if you understand the terms and are comfortable with the financial commitment.

Can I End a PCH Agreement Early?

You should not assume that you can simply return a PCH vehicle without cost before the agreed end date.

Early termination depends on the finance provider and the terms of your agreement and may result in a significant charge.

If your circumstances change, contact us or the finance provider before taking any action so that the available options and potential costs can be explained.

What Are My Responsibilities During a PCH Agreement?

During the lease you will normally be responsible for looking after the vehicle in accordance with the finance agreement.

This can include:

Keeping the vehicle fully insured as required by the agreement.
Making rentals on time.
Servicing the vehicle according to the required schedule.
Keeping the vehicle roadworthy.
Maintaining tyres and other required items where they are not covered by a maintenance package.
Paying parking fines, penalties and other charges for which you are responsible.
Informing the relevant parties of changes that may affect the agreement.
Keeping all keys, documentation and equipment supplied with the vehicle.

Check your individual finance agreement because requirements can vary between finance providers.

What Happens at the End of a PCH Agreement?

At the end of the agreed contract period, the vehicle is normally collected and returned to the finance provider.

Its mileage and condition will be assessed.

Additional charges may apply for:

Mileage above the contracted allowance.
Damage beyond acceptable fair wear and tear.
Missing keys.
Missing equipment.
Missing documentation.
Other charges specified in the agreement.

The BVRLA Fair Wear and Tear Guide provides industry guidance on the condition expected when leased vehicles are returned.

BVRLA – Fair Wear and Tear Guide

Is Personal Contract Hire Regulated?

Personal Contract Hire for private individuals can fall within the UK regulatory framework for consumer hire agreements.

The Financial Conduct Authority regulates relevant consumer credit and consumer hire activities, and the precise regulatory position depends on the agreement and circumstances.

Applied Leasing Limited is an Appointed Representative of Jurni Limited, which is authorised and regulated by the Financial Conduct Authority for credit broking activities.

Applied Leasing Limited acts as a credit broker and not a funder or lender.

Financial Services Register – FCA

Is Personal Contract Hire Right for Me?

PCH may be worth considering if you want to drive a new vehicle for an agreed period, prefer predictable monthly rentals and do not need to own the vehicle at the end.

It may be less suitable if you:

Want to own the vehicle.
Expect your mileage to change significantly.
Think you may need to end the agreement early.
Cannot comfortably commit to the rentals for the full contract period.

There is no single finance option that is right for everyone. Consider your requirements, financial circumstances and the terms of the agreement before deciding.

How to Arrange Personal Contract Hire With Applied Leasing

If you've found a vehicle you're interested in, Applied Leasing can help you understand the available PCH options.

The process normally involves:

Choose your vehicle.
Select your contract term, mileage and initial rental.
Receive your personalised quotation.
Complete a finance application.
Review and complete the required documentation.
Arrange delivery once the vehicle and documentation are ready.
Return the vehicle at the end of the agreement in accordance with the finance provider's requirements.

Finance is subject to status and approval is not guaranteed.

Read Our Step-by-Step Car Leasing Guide

Personal Contract Hire FAQs

Do I own the car with PCH?

No. Personal Contract Hire is a vehicle hire agreement. The vehicle is owned by the finance provider or leasing company and is normally returned at the end of the contract.

Is there a balloon payment with PCH?

PCH does not normally have an optional final balloon payment to purchase the vehicle. You normally return the vehicle at the end of the agreement.

Can I change my mileage during the lease?

Some finance providers may allow mileage amendments during the agreement. Availability, timing and any resulting change to your monthly rental will depend on the finance provider and contract.

What happens if I exceed my mileage?

An excess-mileage charge may apply when the vehicle is returned. The rate should be specified in your agreement.

Does PCH include maintenance?

Not automatically. Maintenance packages are available with many PCH agreements, but you should check the individual quotation to confirm what is included.

Do I need insurance?

Yes. Unless your specific agreement states otherwise, you will normally need to arrange fully comprehensive motor insurance that meets the finance provider's requirements.

Can I modify a leased car?

You should not make modifications without checking the terms of your agreement and obtaining any permission required by the finance provider.

What happens if the vehicle is damaged?

Damage beyond acceptable fair wear and tear may result in additional charges when the vehicle is returned.

More Car Leasing Help

For more information about choosing, arranging and managing a vehicle lease, explore our other guides:

How Does Car Leasing Work? – Step-by-Step Guide

Car Leasing FAQs

What to Check Before Signing a Vehicle Lease or Finance Agreement

UK Car Leasing Questions & Expert Answers

Speak to Applied Leasing

If you're considering Personal Contract Hire and would like help understanding the available vehicles and contract options, speak to the Applied Leasing team.

Call 0330 055 9895

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