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What Are The Different Contract Types?

Personal Contract Hire

What is Personal Contract Hire?

Personal Contract Hire (PCH), also known as personal leasing, is a long-term vehicle rental agreement specifically made for private individuals. The contract agreement has become much more popular in recent years, due to the fact that you can drive the car of your dreams for a much cheaper price, all you have to do is hand the car back at the end of your agreement, and then proceed to lease another new car if you enjoyed the last one. (as you don't own the vehicle)

Personal contract agreements allow you to choose the duration you want the car for (term), choose your initial payment, and adjust your annual mileage; All of which will affect the monthly rate you will pay for your lease. You will also have the option of maintenance with your contract.

If you decide that you don't want a hefty initial payment, you can configure your contract to a no deposit lease, which will simply mean that you will pay a higher monthly fee and don't have an initial payment.

Am I Eligible For Personal Contract Hire?

In order to be eligible for Personal Contract Hire, our funders ask for a good to excellent credit rating, and for you to be over the age of 18. If you're unsure on your credit rating, you can take a free test online.

Key Benefits Of Personal Contract Hire

  • Configurable Contracts
  • Fixed Monthly Payments
  • Brand New Vehicle
  • No Worry About Vehicle Depreciation
  • Building Positive Credit Score
  • Option To Include Maintenance
  • Stock Offers/Factory Orders
  • Can Choose To Lease With Insurance

Drawbacks Of Personal Contract Hire

  • Contractual agreement
  • Don't Own The Vehicle (However You Are The Registered Keeper)
  • Potential Extra Costs (If You Break The Agreement)
  • Subject To Fair, Wear and Tear
  • Potential Service Costs (Optional Maintenance Packages)
  • What Happens At The End Of The Contract?
  • You will simply hand the vehicle back to the finance company.

Business Contract Hire

What is Business Contract Hire?

Business Contract Hire, also known as Business Leasing, is a long-term contractual finance agreement made specifically for Businesses. The agreement is popular for Businesses because of the company car scheme, and especially for those businesses who are interested in fleet leasing, due to the fact that a Business lease is excluding VAT. Businesses tend to pursue a lease as opposed to buying outright because of the large up-front costs and the idea of having depreciating assets.

The way a contract works with Business Contract Hire is practically the same as PCH. You will choose the term, mileage, initial investment and options for the car, which will all affect the monthly rate that the business pays, except you don't have to pay the VAT. Business contract hire also has the option of maintenance with your contract.

Am I Eligible For Business Contract Hire?

In order to be eligible for Business Contract Hire, our funders ask for you to have a good to excellent credit rating and for the driver to be over the age of 18. You can take a free test to check what your credit rating is to see if you're eligible to take out a leasing agreement.

Key Benefits Of Business Contract Hire

  • Fleet Management
  • Fixed Monthly Rentals
  • VAT can be reclaimed
  • Brand New Vehicles
  • Option To Include Maintenance
  • Stock Offers/Factory Orders
  • Potential Fleet Discount
  • Configurable Contracts
  • Can Choose To Lease With Insurance

Drawbacks Of Business Contract Hire

  • Don't Own The Vehicles Outright
  • Subject To Fair, Wear and Tear
  • Mileage Restrictions (Potential Extra-Costs)
  • Potential Service Costs (Optional Maintenance Packages)

What Happens At The End Of The Contract?

You will simply hand the vehicle back to the finance company.

Personal Contract Purchase

What Is Personal Contract Purchase?

PCP is an alternative method of finance that is similar to leasing, however, differs in that you will have an optional balloon payment towards the end of the contract which, if paid, means that you will be the owner of the vehicle. There is also the possibility of refinancing the balloon payment at the end of the contract if you choose to do so. The monthly rate paid on PCP contracts tends to be cheaper in some cases, but this is because of the umbrella payment at the end of the contract, and the equity of the vehicle.

Key Benefits Of Personal Contract Purchase

  • Optional Balloon Payment
  • Potential To Own Car At End Of Contract
  • Flexible Terms
  • Fixed Payments
  • Similar To Leasing

Drawbacks Of Personal Contract Purchase

  • May Not Be Able To Afford Balloon Payment
  • PCP may have interest applied
  • Refinance Balloon Payment - More Years
  • If you choose not to pay the balloon payment you have lost the contributions towards it
  • Charges For Damage On The Vehicle
  • Excess Mileage Charge

What Happens At The End Of The Contract?

There are a few different options you can choose between at the end of a Personal Contract Purchase contract.

  • Hand The Vehicle Back
  • Pay Balloon Payment And Own The Car
  • Refinance Balloon Payment

Hire Purchase

What Is Hire Purchase?

Hire purchase is another popular finance method for motorists who can't afford to buy a vehicle outright. It is an instalment plan whereby a customer pays a higher monthly sum for their vehicle and becomes the owner of the car at the end of the contract. It is called hire purchase because ownership isn't transferred until the payments are complete so you are only hiring it until then.

The customer agrees at the beginning of the contract that they will purchase the vehicle. The monthly payments are higher due to the fact that it contains both the price of the vehicle as well as the interest on it over a period of time. If the customer chooses to do so, they can put down a larger initial investment to lower the monthly costs.

Key Benefits Of Hire Purchase

  • Spread The Cost Of Owning A Car
  • Used and New Cars
  • Customisable Contracts
  • Lower Interest

Drawbacks Of Hire Purchase

  • Failure Of Monthly Payments Means That Your Vehicle May Be Repossessed
  • Monthly Payments More Expensive
  • Higher Overall Cost

How It Differs From Leasing

The below table shows the key differences and similarities between car leasing and hire purchase.

End Of Contract

At the end of a Hire Purchase Contract you will be the owner of the vehicle. 

Differs from leasing table
Differs from leasing table