There's a lot of terminology used when it comes to leasing a car, and here the term 'personal contract hire' (PCH) is explained.
Firstly, leasing a car is growing in popularity as a quick and easy way of getting behind the wheel of a brand-new car.
The term personal contract hire, and leasing are used interchangeably but mean the same thing.
Also, the term personal contract hire should not be confused with personal contract purchase, or PCP.
The difference between PCP and PCH is that with personal contract hire, you do not have the option to buy the car when the leasing agreement ends.
With personal contract purchase, you will have the option to buy the car, this is known as a balloon payment and can be a large amount to stump up.
Personal contract hire is simple to understand for those who are thinking of leasing a car for the first time.
You will need to:
There are two issues to remember about personal contract hire, and they are:
The best way to determine the difference between a PCH and PCP agreement, is that with a personal contract hire deal you are essentially renting the car from the leasing company.
With PCP, you are also renting but have the choice of buying the car when the agreement ends.
When leasing a car, you will need to decide what your annual mileage will be.
It's important that you calculate this figure carefully so that you avoid excess mileage charges.
These charges can be quite high depending on the car leasing company's own rules - from a few pence per mile, and up to 30p.
It's easier and cheaper to work out how many miles you travel every year, and then add 1,000 or 2,000 miles to ensure you do not go over your agreed mileage allowance.
As with most financial undertakings, there are pros and cons when it comes to personal contract hire.
The pros for leasing a car include:
The cons for leasing a car include:
Don't forget too that you will need to insure your leased vehicle for driving on the UK's roads.
Since your personal circumstances may change, it is possible to cancel a car lease agreement before the term ends.
This is known as the early termination and there will be a fee levied when cancelling early.
This fee will vary between various car leasing companies and it's always worth checking the small print of your car lease agreement before signing it.
Personal contract hire is a popular way to lease a car and is suitable for most eligible drivers to lease a vehicle for their private use.
Along with having lower monthly payments, lots of people are choosing PCH as a cost-effective way of getting behind the wheel of a more expensive vehicle than they would otherwise be able to afford.
Instead, when leasing a car, the driver is essentially paying for the car's depreciation which is why the payments are lower.
And when the leasing agreement ends, there's no obligation remaining, and you just hand the car back.
Someone from the car leasing company will come and inspect the vehicle for damage and ensure that the mileage allowance has not been exceeded.
It's at this point we should highlight that if you fear that you are about to exceed the annual mileage that the car leasing company is only interested in the mileage at the agreement's end.
However, if you are travelling more miles than usual, then you should contact the car lease company.
They will then make a calculation to adjust your monthly payment to take in a higher mileage need.
This will help when you need to hand the car back to avoid the excess mileage charge.
And when the agreement ends, you can decide whether you want to lease a new vehicle or choose another way to finance a car.
While you will never own the car, you also need to consider:
If you would like to know more about personal contract hire deals and the difference between personal contract purchase PCP then you should speak with the Tilsun Leasing team on 03330 040 888.
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