PERSONAL CAR LEASING

There are 2 main car leasing finance methods that fall into the category of personal car leasing. They are Personal Contract Hire (PCH) and Personal Contract Purchase (PCP). These are lease agreements for private individuals and although there are similarities between the 2 methods there are also subtle differences.

Personal Contract Hire

Personal Contract Hire (PCH) is an agreement made between an individual and a car leasing company. The personal car leasing agreement will be to pay fixed monthly payments for the use of a car for a set time period and set mileage. The car is usually returned to the lease company at the end of the lease contract.

Personal Contract Purchase

Personal Contract Purchase (PCP) is another method of personal car leasing, once again using fixed monthly payments over a set period of time and set mileage. The main difference between PCP and PCH is in the inclusion of an optional final Balloon Payment. The Balloon Payment allows you to purchase the vehicle at the end of the lease agreement. The value of the Balloon Payment is determined before you sign the lease agreement and is equivalent to the assured minimum projected cost of the car at the end of the contract. In summary, PCH and PCP are the 2 most common forms of personal car leasing.

What do PCP and PCH have in common?

Whilst both methods of personal car leasing do have subtle differences, they do also have these benefits in common:

• Small initial deposit.
• Fixed low-cost motoring.
• No risk from residual value loss.
• Ability to hire cars that may not be affordable to buy outright.
• The option to frequently change your vehicle.

Which personal car leasing option should I choose?

Next, we will look at the specific advantages of each personal car leasing option.

Benefits of Personal Contract Hire
The following are further benefits that you would gain from Personal Contract Hire:

• Road Fund Licence - the Road Fund Licence is included in PCH agreements for the duration of the lease contract.
• Disposal is not an issue - the car is returned to the lease company at the end of the lease agreement and there are no concerns about the car's residual value and also no hassle in looking for a buyer.

Benefits of Personal Contract Purchase
The following are further benefits that you would gain from Personal Contract Purchase:

• Final Balloon Payment - a pre-arranged sum that will allow you to purchase the car at the end of the lease agreement.
• Optional maintenance packages - personal contract purchase offers optional maintenance packages to suit the customer's needs. This will cover any unexpected maintenance costs that arise during the term of the lease.

Conclusion

Personal car leasing - PCH appeared as an alternative to the company car and allowed employees to use their monthly car allowance to hire a quality car of their choosing. This method of leasing allows the customer to drive a car that it would otherwise be unreachable. The ability to frequently change you car is also an added bonus to many PCH users. PCP, as with PCH, offers the customer low fixed-cost, inflation free motoring. This option is perfect for a customer who would like to purchase a car of their choosing. By paying in monthly instalments for a set period of time, you may then purchase the vehicle buy making a pre-arranged Balloon Payment.

Quick links

• Luxury car leasing
• Prestige car leasing
• Private car leasing
• Used car leasing