Personal Contract Hire (PCH)

A Personal Contract Hire is, in many cases, exactly the same agreement as business contract hire – but the agreement is in the name of the individual and includes VAT.

The vehicle is taken on for a fixed period of time (usually two to five years), and at the end of the primary term, the vehicle is returned to the leasing company – just as you might with a company car.

Personal Contract Purchase (PCP)

A Personal Contract Purchase is essentially an adaption of a traditional hire purchase with balloon agreement. It is more geared towards individuals wishing to buy the car at the end of the term for an amount which is guaranteed at the start of the contract.

However, a PCP gives the best of both worlds with the added flexibility of being able to hand the vehicle back to the leasing company with no further payments being made.

Key points of interest on Personal Contract Hire and Personal Contract Purchase

• No company car tax – because the car is privately funded there is no taxable benefit
• Road Tax is usually included for the full duration of the contract with a PCH, and for at least 12 months with a PCP (although check the terms with your provider)
• Fixed Cost Servicing and Tyres plus a wide range of additional products and services are available, providing complete peace of mind. In fact – there are now many providers who offer these products on a ‘standalone’ basis – so shop around
• Individuals are able to access deals only available to leasing companies with exceptional discounts – although some deals are not available on a PCP type agreement
• Low Initial Payments required (typically three months), and monthly payments are fixed for the duration of agreement (regardless of interest rate changes) allowing accurate budgeting
• Both agreements are ideal for those wishing to opt out of a company car scheme, and are in receipt of a cash allowance…
• …Or a small business owner wanting to run a private car with occasional business use reimbursed through Approved Mileage Allowance Payments (AMAPs): 40p for the first 10,000 miles; 25p thereafter (note: since this has risen AMAPs have risen to 45p per mile.)

Further information

• Paul Bulloch is the managing director of BVRLA-approved car leasing broker Concept Vehicle Leasing
• Click here to read more on Approved Mileage Allowance Payments (AMAPs)
• Click here for an explanation of company car tax