Personal Car Leasing Guide

There are two 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 two methods there are also subtle differences.

Mercedes Benz C-Class Estate 2014

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 returned to the lease company at the end of the lease contract.

Personal Contract Purchase

Personal Contract Purchase (PCP), sometimes known as a Personal Contract Plan, 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 guaranteed minimum projected value of the car at the end of the contract. In summary, PCH and PCP are the two 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:

  • Low initial deposit.
  • Fixed monthly payments.
  • Protection from residual value fluctuations.
  • Ability to drive cars that may not be affordable to buy outright or on Hire Purchase (HP).
  • The option to frequently change your vehicle.
  • Ability to drive a brand new car and benefit from technology advancements in safety, fuel efficiency and comfort.
  • Optional maintenance packages. This will cover any unexpected maintenance costs that arise during the term of the lease.

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.
  • For individuals looking to drive and eventually own a car, a PCP deal can be the flexible and affordable way in doing so.


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.