Leasing or Contract Hire (PCH is Personal Contract Hire) can be a simple way to drive your brand-new car in exchange for fixed monthly payments. It is effectively a long-term rental – simply agree the contract length, mileage allowance, and initial payment, and the car can be delivered to your door! You won’t own the car, and at the end of the agreement you simply return it to the leasing company.
Initial payment
The initial payment is the first month’s payment which is higher than usual and calculated as either 3, 6, or 9 times the regular monthly amount. Similar to a deposit, it’s the part of the hire contract that you pay up-front. It is usually payable shortly after delivery and is non-refundable. After this initial payment in month 1, you pay the regular monthly payment for the remainder of the contract.
Maximum miles/year
This is the average annual mileage limit for your hire contract. You shouldn’t exceed the total mileage for the contract length otherwise it’s likely you’ll need to pay excess mileage charges.
Exceeding the mileage limit
Most lease contracts have an ‘excess mileage charge’ if you are over the agreed mileage at the end of the contract. This is normally a ‘pence per mile’ charge which will be stated in the contract hire agreement up-front. Be sure to check this before signing
PCP (Personal Contract Purchase) v Personal Contract Hire (PCH)
With both PCP and PCH you pay an amount up-front, followed by fixed monthly payments. The main difference is at the end of the contract – with PCH you must hand the car back, but with PCP you have the option to pay a balloon payment and buy the car outright. PCH is a lease in the truest sense of the word, whereas PCP offers ownership options. Be sure to discuss your options with the dealer or broker if anything is unclear, and to make sure you choose the best option for you.
How Does Gap insurance fit in?
You may need different gap insurance depending on whether you lease, own your car or have the ability to own your car at the end of your finance agreement. You can read more on the types of gap insurance or give us a call on 0800 138 8333 and we’ll be happy to chat you through it.