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What is Personal Contract Hire?

Personal Contract Hire (PCH) is a finance agreement between an individual and a finance company: the finance company owns the vehicle, and you are essentially hiring it for a fixed contract duration, usually between two and five years.

What are the benefits?

  • No depreciation risk — the finance company takes on the risk. If the vehicle is worth less than anticipated at the end of the contract, you have nothing further to pay.
  • No disposal worries — the finance company simply collects the vehicle at the end of the contract and deals with selling it on. Your contract ends at collection and there's nothing further you need to do.
  • Vehicle Excise Duty (Road Tax) — this is included for the duration of the agreement.

How does it work?

At the outset, you select the term and annual mileage, for example, 3 years and 10,000 miles per annum. This will give you a fixed monthly cost, which can help with budgeting and cash flow. If you wish, you can also choose to include maintenance, which will cover you for routine servicing, MOTs and replacement tyres, and allow you to further fix your motoring costs in advance.

At the end of the contract, the finance company will collect the vehicle, appraise its condition and take a mileage reading. If you're over the agreed mileage limit, excess mileage charges will apply. The excess mileage rate is set in advance as a pence per mile cost.

The finance company allows for fair wear and tear, which is any damage which can reasonably be attributed to the vehicle's age and mileage. if the vehicle has sustained damage which exceeds fair wear and tear, they may bill you for their costs in rectifying the damage.

Things to note

  • Ending the contract early can be expensive.
  • You must return the vehicle in a well-maintained condition — additional charges may apply if you return the vehicle with damage over and above that stated in the Fair Wear and Tear Guide.
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