There’s also often a mileage limit, and you’ll pay more to be able to drive further each year. This is because the car’s value reduces with mileage, and the company you are hiring from will want to recoup that cost when the car is returned to it.
In most cases you won’t have to worry about taxing your car, because this is all included in the price. However, insurance isn’t always included so you’ll probably have to sort that out for yourself separately each year.
Once the term is up, you simply stop paying and hand the car back. You’re then free to find another deal, choose another finance method or anything else – it’s up to you.
Advantages and disadvantages of Personal Contract Hire (PCH)
Car finance isn’t right for everyone, and not all types of car finance are ideal for each person. That’s why there are different types, after all. There are benefits and drawbacks of each, and we’ll look at the pros and cons of PCH below.
Advantages of Personal Contract Hire (PCH)
- It’s usually the most affordable form of finance, with lower monthly payments than other methods
- Some deals have very low entry costs with very small deposits
- Simplifies monthly outgoings on your car
- Maintenance and tax costs often included in the price
- Many options for length of term and mileage limits
Disadvantages of Personal Contract Hire (PCH)
- You don’t build equity in the car, so the money you spend is gone – unlike schemes that let you own the car via finance such as PCP
- The car is never yours, even if you like it and want to keep it
- Strict rules on servicing requirements and mileage limits to keep track of
- Not always cheaper than PCP, so you need to do your research on total costs
Hire Purchase vs Personal Contract Hire
Hire Purchase (HP) uses the word ‘hire’ in the name, but it’s not quite the same as PCH. With HP you are actually buying the car, so it’s not a rental agreement but a way to pay for the car over a long period of time. The cost of the car is split into monthly payments that add up to the price you’ll pay for the vehicle.
It’s a way to buy a car without having the money to pay for it up front. Of course, you’re charged interest as part of the price, so it’s more expensive than buying with cash, but that’s the case with any finance agreement. So if you want to pay monthly for a car such as with leasing (PCH), but also want to own the car, then HP could be an option for you. Read more about it in our detailed guide here.
Frequently Asked Questions
Yes, you can buy a used car using PCH, and it works exactly the same way as it does with new cars. Once the agreement is up you hand the car back, and any depreciation is paid for by you with your monthly payments for the dealership to recoup when you hand it back.
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