For this reason, we at Askaprice have put together comprehensive guides that offer in-depth explanations for each form of finance and leasing, along with the pros and cons of each.
One potential option for customers looking to lease a car or van is the use of a Personal Contract Hire (PCH).
Personal Contract Hire explained
Unlike Personal Contract Purchase and Hire Purchase, Personal Contract Hire is solely a form of leasing that is available to individual buyers.
With a Personal Contract Hire, leasing customers will simply need to pay fixed monthly payments that have been calculated based on the expected depreciation of their chosen model.
The calculated depreciation is the difference between the purchase price of the model and its resale value at the end of the agreement. The resale value takes into account the vehicle’s age and mileage.
If the chosen vehicle can hold its value better then the monthly payments of the customer will be lower. For this reason, leasing a more prestigious car is much easier than if you were to purchase one outright.
Personal Contract Hire example
The following is an example of a Personal Contract Hire leasing agreement for a customer wanting to lease a Ford Fiesta Zetec 1.3-litre 81bhp.
In this leasing example, the customer’s contract will be for 36 months, with fixed monthly payments of £149 and an agreed maximum mileage per year of 9,000 miles.
A breakdown of the payments is shown below.
|Advance Rental||– £3,427.00|
|Contract Term||– 36 months|
|35 Monthly payments of||– £149.00|
|Annual Mileage||– 9,000 miles per annum|
|Excess Mileage Charge||– 5.33p per mile|
- Customers will be able to drive a brand new car every two to four years without having to worry about the model depreciating or running out of warranty
- Leasers will not have to concern themselves about how they will eventually sell the vehicle on in the future
- Personal Contract Hire requires a smaller deposit and lower monthly payments than financing a car with Personal Contract Purchase or Hire Purchase
- Payments are fixed, meaning a customer’s monthly bills will contain no unwanted surprises. Payments can also include a maintenance package to help customers budget and road tax is usually included
- A Personal Contract Hire agreement represents a hassle-free lease as customers can simply hand the car back at the end of the contract
- There is no option to purchase the chosen vehicle at the end of the contract – this is only available with Personal Contract Purchase and Hire Purchase
- As the chosen model is not the property of the customer, they will need to make sure that they have taken out comprehensive car insurance
- If the agreed mileage limits are exceeded, it can be very expensive for the customer
Why should I opt for a Personal Contract Hire (PCH)?
A Personal Contract Hire would best suit a customer who wants to drive a brand new car every few years without having to actually purchase the model.
Paying fixed monthly payments for a vehicle will make budgeting easier for customers.