How does PCH work?
Personal contract hire is a form of long-term rental which is perfect for those who know they will be looking to move on to another car once the agreement period is over. You lease the car for an agreed period, making fixed monthly payments. When the contract expires, you simply hand the car back without any further obligation, subject to condition and mileage.
You could then choose another vehicle under the same scheme (subject to credit checks). This enables maximum flexibility with your choice of vehicle and the benefit of driving a brand-new car every few years.
When the Agreement Starts
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The amount you want to borrow, less any advance payment is agreed.
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Your application for finance is then submitted to the relevant motor finance company and, when you pass their checks, the lender will pay for the car on your behalf.
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Your monthly payments are fixed during the period of the agreement.
What happens at the end of the agreement?
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You return the car to the dealership with no option to buy the car - hand back the keys with no further obligation.
Advantages of Personal Contract Hire
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The car can be driven away without the worry of a warranty expiring or about the best way to re-sell it in future.
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There is no uncertainty about the value of the vehicle at the end of the term.
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The car can be easily changed at the end of the agreement period for another new vehicle.
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It provides access to a wide range of vehicles on a hire basis which might not be affordable for outright purchase.
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The car can be easily changed at the end of the agreement period, with access to a wide range of vehicles which, under normal circumstances, could not be afforded.
Things to remember
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It is best to be realistic about annual mileage as there will be a charge for each additional mile covered.
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There is no option to buy the car at the end of the agreement.
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You are tied in for the full duration of the agreement and will incur charges if you need to change or stop the contract.
Alternative finance options
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