Why it works: how you could benefit from Personal Contract Hire (PCH) car finance

Beautiful couple in car dealership chooses car

With the cost of living rising significantly, it would come as no surprise that browsing for a new car could be at the bottom of the pile for purchases. The current climate doesn’t have to put you off from finding your next vehicle though, as car finance is becoming more popular. 

Car finance is a catch-all term for a range of options that allow you to borrow the money you need to buy a new or second-hand– or lease it for a period before having the option to buy it outright. It can be quite a daunting feat until you get your head around it, and there are several options to consider – each suitable with different drivers. 

If you’re a driver who changes their car often, one of the finance options available is Personal Contract Hire (PCH). But what is PCH and how could it benefit your lifestyle?

What is Personal Contract Hire (PCH)?

PCH is a car lease option that is straightforward to navigate. Essentially, you are hiring a new car for several years before returning it at the end of the lease period. This is a popular option as it gives you cost-effective access to new vehicles without the large drop in value normally associated with owning a new vehicle outright. 

With a PCH finance agreement, you’re essentially paying for what you use. Before you start, you will need to decide on your agreement length and the mileage restrictions to set in place. After this, you will pay a deposit so you can begin your monthly car payments. Most providers of car finance will ask for a minimum of 10% for a deposit, however, you can opt to put a bigger deposit down to make your monthly payments even lower if you wish to do so.

At the end of your personal contract hire agreement, you will need to return the vehicle to the finance company. There is no option to purchase the car at the end of your term but you can simply replace it with another one.

Since the car has to be returned in its original condition, many car dealerships offer service plans that you can add to your deal to ensure you hand the car back in good condition and avoid paying fines.

This is a great option if you’re looking for a long-term hire car as you don’t want to buy it outright – which is why this is a cheaper option than the likes of taking out a Personal Contract Purchase (PCP) finance contract, which comes with additional costs like a balloon payment as the end of your term if you want to keep the car.

Know the benefits of PCH:

So you know what PCH finance is, but how can this type of finance benefit your car use? Here are some of the reasons why PCH could be the right option for you:

  • Drive a new vehicle on low monthly repayments.
  • Flexible contract terms ranging from 24 to 60 months.
  • Return the vehicle at the end of your contract.
  • The hassle of having to sell the car is removed.
  • Reduced risk from losing money on the car’s value due to depreciation.

If you think this is the finance deal for you, just bear in mind that there is no option to buy the car at the end of your contract, as well as needing to pay any excess mileage that is outside of your agreed contract. With all this in mind, there’s absolutely no reason why you can’t get your hands on a new car sooner than you imagined.