When you think of car leasing, you might have two things in your mind. You probably know about car leasing if you work for a business that provides company cars to its employees. Or you might think leasing is just something short term, another word for car hire. But car leasing is not just for businesses or the short term, it’s a way of getting yourself a decent car at an affordable cost. Leasing or Personal Contract Hire (PCH), is similar to a lot of car finance agreements, but also has its own quirks and qualities. Here’s our quick guide to PCH.

What is personal contract hire?

Personal contract hire is a car leasing product where you effectively hire the vehicle for the length of the agreement. Instead of paying off the entire cost of the car across the agreement, you pay off the depreciation of the vehicle – the difference in value of the car between the start and end of the leasing deal. In essence, it’s a long term car hire type of product.

It’s similar to Personal Contract Purchase or PCP in many ways, but at the end of the agreement, you don’t have the option to buy the car outright.

How exactly does it work?

At the start of the agreement, you will pay a deposit, normally equivalent to six to nine monthly payments. This will reduce the amount you pay each month, so a large deposit is recommended.

The guaranteed future value will also be set at the start of the agreement. This is how the monthly payments will be assessed. Different cars depreciate at different rates, so you should shop around to find the car and the price that best works for you. Once the term length and monthly payments have been calculated, you’re good to go!

You should be aware that this type of package comes with annual mileage limits and condition requirements. These will be set at the start of the agreement too. The amount of miles the car does will affect the value of the car, as more miles equals more wear and tear on the vehicle. So you will need to consider this at the start of the agreement.

Just make sure you are honest with the amount you think you will drive, because if you exceed the mileage limits, you will be charged extra.


Is it the right type of leasing package for me?

The good thing about a leasing package like Personal Contract Hire, is that the monthly payments are generally a lot lower than a regular finance agreement. You also don’t have to worry about depreciation, as you will not lose any value in the car because you don’t own it. Once the agreement is finished, you can move on and start a new one on a newer, better vehicle.

The downsides are that you will be investing some money in a product that you don’t own, so you won’t be able to sell the car at the end and recoup some of the money you’ve invested. You also need to be more careful with a leased car, as the condition and mileage requirements can be expensive if broken.

A car leasing deal is a great way to get a better car at an affordable price. The question you have to ask yourself is if you really mind investing money into something that gives you short term benefits?

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