Part 3: PCH explained - Car finance made easy

Having read our two previous finance blogs on Personal Contract Purchase (PCP) and Hire Purchase (HP) now here is part three. Our third and final blog will be explaining, Personal Contract Hire or, as it’s also known, PCH.

We hope that this series of blogs will have helped you gain a better understanding about the finance options available to you when buying a new or used car. If you have any questions about any of the finance blogs please do not hesitate to contact us and we will be more than happy to answer them for you.

Happy reading!

Personal Contract Hire, or PCH, is a fixed term, fixed cost driving plan that is sometimes referred to as a rental scheme. Rather than owning the car at the end of the agreement, PCH works effectively as a long-term rental agreement where the ownership of the car remains with the finance company.

With a PCH agreement, you hire your choice of car for an agreed amount of time and mileage. You pay a fixed, up-front rental which acts as a deposit. This can be the equivalent of between 1 and 12 months’ worth of payments depending on your agreed plan. After this, you simply pay a fixed monthly payment for the rest of the agreement. PCH agreements usually last between two to three years and, once the agreement is up (subject to the car's condition,) you simply hand back the keys.

If the vehicle is in good condition, and within the agreed mileage limit, there will be nothing more for you to pay. What is important to remember is that although some PCH agreements come with servicing and maintenance included, not all do. It is essential that you check this as it is your responsibility to maintain and insure the vehicle during your agreement.

The main benefits of taking out a Personal Contract Hire finance agreement are:

• You can drive a brand-new vehicle of your choice away for a fixed monthly price

• The monthly repayments can be a lot lower compared to other finance methods

• You have guaranteed protection against vehicle depreciation and you can simply hand the keys back at the end of the agreement rather than having the hassle of selling

• At the end of the of your agreement, you have the option to take out a new agreement on a brand-new vehicle of your choice

Personal Contract Hire is a great option for anyone who doesn’t want to own their own vehicle but wants a fixed monthly payment.

It is important to set a realistic mileage when you take out a Personal Contract Hire agreement. If you go over the agreed mileage limit a fee will be charged for each excess mile. You cannot end the contract early and there is no option to buy the vehicle at the end of the agreement.

Like all finance options discussed within these blogs, it is important to choose one that fits your circumstances. Our sales teams here at Smiths are specially trained to guide and support you on your car buying journey.

We hope you have found this blog useful and it has answered questions you may have had about Personal Contract Hire. To get in touch with a member of our team please click on the buttons below.

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Reg Office: Sturrock Way, Bretton, Peterborough, PE3 8YL

Reg. Company Number: 359860

VAT Reg. No. 120617216

Financial Disclosure

F.P. Smith Holdings (Newark Avenue) Limited, F.P. Smith Holdings (Ilkeston) Ltd, and F.P. Smith Motors Ltd are Appointed Representatives of Automotive Compliance Ltd, who is authorised and regulated by the Financial Conduct Authority (FCA No 497010). Automotive Compliance Ltd’s permissions as a Principal Firm allows F.P. Smith Holdings (Newark Avenue) Limited, F.P. Smith Holdings (Ilkeston) Ltd, and F.P. Smith Motors Ltd to act as a credit broker, not as a lender, for the introduction to a limited number of lenders and to act as an agent on behalf of the insurer for insurance distribution activities only.

We can introduce you to a selected panel of lenders, which includes manufacturer lenders linked directly to the franchises that we represent. An introduction to a lender does not amount to independent financial advice and we act as their agent for this introduction. Our approach for a new car purchase is to introduce you first to the manufacturer lender linked directly to the particular franchise you are purchasing your vehicle from, who are usually able to offer the best available package for you, taking into account both interest rates and other contributions. If they are unable to make you an offer of finance, we then seek to introduce you to whichever of the other lenders on our panel is able to make the next best offer of finance for you. Our aim is to secure the best deal you are eligible for from our panel of lenders. Lenders may pay a fixed commission to us for introducing you to them, calculated by reference to the vehicle model or amount you borrow.

Different lenders may pay different commissions for such introductions, and manufacturer lenders linked directly to the franchises that we represent may also provide preferential rates to us for the funding of our vehicle stock and also provide financial support for our training and marketing. But any such amounts they and other lenders pay us will not affect the amounts you pay under your finance agreement, all of which are set by the lender concerned. If you ask us what the amount of commission is, we will tell you in good time before the Finance agreement is executed. All finance applications are subject to status, terms and conditions apply, UK residents only, 18’s or over. Guarantees may be required.

In the event of disputes we are unable to resolve the Retail Motor Industry Federation (RMI) National Conciliation Service will offer free impartial advice and when appropriate an Alternative Dispute Resolution (ADR) service that we are fully committed to. For further information you can visit their website at www.nationalconciliationservice.co.uk or call 01788 538317.

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Part 3: PCH explained - Car finance made easy