How does PCH work?
- You choose the car you want
- Choose the mileage you think you will cover and the length of the agreement
- Pay the deposit (usually three to six months of rentals in advance)
- You can add maintenance to take away all running cost worries
- You must return the car in good condition – otherwise you will be liable to pay for remedial work to scuffed alloys and scratches and dents
- If you go over the agreed mileage you will be subject to an excess mileage charge
PERSONAL contract hire – or PCH – is essentially the same as regular contract hire; except that it applies exclusively for private individuals. Hirers obtain use of a new car for a contractual period and make fixed monthly payments to a car leasing company for the duration of the contract.
When the contract expires they simply return the car to the leasing company and renew with a new car and contract. As a result they never have to concern themselves with the possible resale value of the car.
Budget for maintenance, too
One motor dealer explained to Business Car Manager: “A great benefit for small business employees is that most PCH deals will include maintenance packages so users don’t have to worry about the general upkeep of the vehicle. Also, the monthly instalments should generally be lower than those of personal loans. They will also be fixed which will help budgeting which in today’s uncertain climate is just the ticket.”
He added: “It also gives many drivers access to more upmarket cars. We find that with a PCH deal people can afford a car that may otherwise be too expensive. As luxury cars tend to depreciate at the slowest rates, these can often provide the best PCH deals.”
Personal contract hire is often popular with small business owners or the self-employed. If you are a limited company, then there is no company car tax to pay. If you are self-employed and not VAT-registered, it’s also an effective method of running a new car – costs can be set against taxable profits minus an element of private use.
You can recharge business mileage by using the AMAP method of 45p per mile (available at this rate for the first 10,000 miles), which is tax-free.
PCH is most popular form of car lease at the moment – a trend which looks set to continue.