Personal Contract Hire (PCH)
Pure leasing — you pay to use a car for a fixed period, then hand it back. No ownership, no balloon payment, and often the lowest monthly cost. But not for everyone.
Personal Contract Hire — commonly known as personal leasing — is the simplest of all the car funding methods. You agree to lease a car for a fixed term (typically 2 to 4 years), pay an initial rental (usually equivalent to 3–9 months’ payments), make fixed monthly payments, and hand the car back at the end. That’s it.
There is no option to buy the car at the end, no residual value risk, and no balloon payment. You’re essentially paying for the right to use the car during the lease period — nothing more, nothing less.
Because you’re only ever paying for the car’s depreciation over the lease period, PCH often produces the lowest monthly payment of any funding method for a given car — even lower than PCP in many cases, and significantly lower than HP.
The trade-off is that you build no equity, have no path to ownership, and are bound by mileage limits and condition standards that can result in charges at the end of the lease.
What’s typically included
PCH deals vary — some include maintenance, some don’t. Always check what’s in the package.
See what you pay vs what the car is worth
The chart shows the car depreciating over time against your cumulative payments — illustrating that you’re always paying for a depreciating asset you’ll never own.
Car value (depreciating)
Cumulative payments made
Illustrative figures only. Monthly payment estimates are based on typical lease pricing models and UK average depreciation rates. Actual lease rates vary significantly by vehicle, mileage, term, and provider. These figures are for general educational purposes only and do not constitute a regulated credit illustration, a personal recommendation, or an offer of finance. Always obtain a formal written quotation from an FCA-authorised lender before entering into any finance agreement.
The pros and cons
Advantages
- Usually the lowest monthly payment of any personal funding method
- No residual value or depreciation risk — the leasing company carries it
- No balloon payment at the end — just hand the car back
- Access to new cars every 2–4 years with minimal hassle
- Maintenance packages available to fix all costs in advance
- Particularly cost-effective for EVs where residual values are uncertain
Disadvantages
- You never own the car — nothing to show at the end of the payments
- Mileage limits with excess charges — typically 10–15p per mile over
- Condition charges if the car is returned above fair wear and tear
- VAT is charged on all payments — not reclaimable by private individuals
- Early termination is expensive and complicated
- No Consumer Credit Act protections — it’s a hire agreement, not a credit agreement
PCH suits certain drivers very well — but it’s not for everyone
If you change cars regularly, always want something new, and have a predictable annual mileage, PCH can be genuinely excellent value. You are protected against any unforeseen drop in resale value, but consider that you also won’t gain anything if the cars value is more than expected at the end of the agreement.
If you drive more than your contracted mileage, want to build equity, or need to exit early, PCH can come with some expensive fees. We’ll help you understand whether PCH is right for your situation — and compare it honestly against every other option.