Buying a car using personal leasing/contract hire (PCH)

When you want to buy a new car, is leasing or contract hire your best option?

Words by: First published: 1st May 2015
You rent a car from a dealer or hire company for a set period of years. At the end, you give the car back, but you’ll have to stick to mileage limits.
Pros of PCH:
  • There’s less financial risk involved, as depreciation isn’t your concern
  • You get to drive around in a brand-new car every three years or so
  • The amount you pay each month is fixed, so you know precisely how much it’s going to cost you over the contract period
  • Some PCH agreements include servicing and maintenance
Cons of PCH:
  • If the car doesn’t suit you after a few months, you’re stuck with it for the remainder of the contract
  • You may have to raise a fairly significant deposit
  • You never own the car: you’re leasing it from the company and you have to give it back at the end of the agreed term
  • If you go over your pre-arranged mileage limit, you may find yourself facing hefty penalty charges
  • If you can’t keep up with the payments, the car will be taken away
What is Personal Contract Hire (PCH)?
Leasing can be a good way of driving a car you can’t afford using other finance methods. There are several leasing companies, as well as dealers, that offer this, so you can shop around for the best deals.

You typically pay a few months’ rental costs in advance (a bit like a deposit), and then pay a monthly fee over a set period of years to lease the car. The car is never yours and, in contrast to other payment methods, you will never get any equity in the car to use as a part-exchange against your next car.

You can often include things like servicing and maintenance costs in the payments for complete peace-of-mind, but the leasing agreements contain a limit on how far you can drive. The limit you agree at the start will affect your monthly payments: for example, a 5,000-mile annual limit is much cheaper than a 10,000-mile deal.

If you exceed the agreed limits, you’ll have to pay extra charges.
Top Tip
  • Look at leasing companies as well as car dealers to find the best leasing deals
Related topics:
New car finance