PCP vs PCH vs BCH: Which Is Right for Me?

5 minutes Published: 06/05/2021

There’s more types of car finance floating around than rusty, 52-plate Ford Fiestas, so it’s not surprising that it can be difficult to get your head around which form is best for you, to begin with.

Here’s our comparison of three of the main types of car finance options: personal contract purchase, personal contract hire and business contract hire.

This is definitely a battle of the behemoths of car finance: PCP vs PCH vs BCH.

Place your bets: the fight’s about to begin.

Overview of car finance

First of all, let’s make sure that we’re all on the same page when it comes to car finance. Here’s the three of the main types.

  • Personal contract purchase (PCP): Personal contract purchase lets you lease a car for a period of time, and at the end of the agreement, gives you the option to buy the vehicle, if you want, by paying a fee called the ‘balloon payment’.
  • Personal contract hire (PCH): Personal contract hire (also called car leasing) is very similar. You’ll pay fixed, monthly payments for a period of time but rather than getting the opportunity to buy the car at the end of the agreement by paying a balloon payment, you’ll just give the car back to the finance company.
  • Business contract hire (BCH): The easiest way to think of business contract hire is as the business version of personal contract hire (PCH). In BCH, instead of a private individual leasing a car for a period of time, a business leases it. After the agreement comes to an end, the business gives the car back to the finance company.

So, let’s get down to the nitty gritty of comparing them.

Round #1 — Cost

You may pay a similar monthly payment for a personal contract purchase agreement as the cost to lease a car, but in the long term it’s likely to work out as more expensive. This naturally makes PCH an attractive option, if you’re super-stretched for finances. The main difference between the two is that with PCH you don’t have the option of becoming the legal owner of the vehicle – but if you’re already trying to save money, that option’s probably not going to interest you anyway.

If you’re leasing a car for business though, you’d be better off going for business contract hire rather than a standard PCH. A BCH agreement will usually have lower monthly payments than a PCH one and because you aren’t given the option to buy the car, you won’t be met with a huge balloon payment at the end of it. You’ll also be able to claim a lot of things back on expenses.

  • Key Takeaway: Personal contract hire is your best bet here if you’re buying as an individual, rather than a business (if the opposite is true, then choose BCH).

Round #2 — Flexibility

Personal contract hire and it’s business counterpart business contract hire are easily the best types of car finance when it comes to flexibility. You’ll be able to have a say over the length of the contract and be given the choice about how high (or low) you want to fix your monthly payments. A higher monthly payment will let you lease the car for a shorter term, whilst a lower monthly payment will do the opposite.

If you want protection when it comes to the car being repossessed under a PCP, if you’ve already paid off a third of the total value of the car and fall behind in the payments, the finance company has to apply for a court order before they can repossess the car. This gives you a bit of time to find the money to get back up to date with payments. Under PCH and BCH, a company can repossess a car straight away – even if you’ve paid off over a third of the value.

  • Key Takeaway: Personal contract hire and business contract hire offer the best flexibility when it comes to monthly payments. Personal contract purchase offers slightly more security, if you’re worried about the car being repossessed. But only a tiny bit.

Round #3 — Investment

The argument goes that if you’re already paying monthly payments, you might as well get something at the end of them. A personal contract purchase agreement gives you just that. Sure, you’ll have to do battle with the dreaded ‘balloon payment’ waiting for you when you finish the term, but at least you’ll have something to show for those months of payments.

If you absolutely need your own set of wheels, then a PCP agreement is probably the best to choose. In fact, it’s probably your only option to be honest – PCH and BCH don’t give you the chance to buy the car at the end of the contract.

  • Key Takeaway: Cars lose value really fast, so they’re not really much of an investment. But if you’re buying to own in the long-term, then a PCP contract is probably best suited to you, rather than a PCH or BCH.

Round #4 — Choice of cars

You should find that all three types of car finance give you a lot of choice when it comes to available vehicles. Often the only limit will be your wallet and your imagination. All the major brands will be represented by a decent dealer, offering you tons of choice – which can be a good or a bad thing, depending on if you’re good at making up your mind.

Whether you’re looking for a compact Nissan Micra to shuttle between supermarkets or you’re after an elegant Ferrari 488 Convertible to blast through traffic jams, PCH is pretty versatile, giving you access to a huge variety of brands and models.

  • Key Takeaway: Personal contract hire and business contract hire are the winners here. You’ll get great access to a variety of cars and the monthly payments should be slightly lower compared to PCP.

Round #5 — Age and quality of car

Okay, PCP might be very similar in terms of the lease arrangement, but the option to buy the car at the end can still push the price of your monthly payments up slightly, making it slightly more expensive than PCH and BCH and that’s not even considering the extra money you’re expected to find for the balloon payment if you want to buy the car.

The natural flexibility of personal contract hire means that you can get access to some pretty decent, high-spec cars – cars that you probably wouldn’t be able to afford to buy outright without car finance. If you’re looking to drive the newest models, but don’t want to have to stump up tens of thousands of pounds upfront, PCH is the only way to go. Okay, you could get the roughly the same arrangement with a PCP contract but you’ll also have a slightly higher monthly cost to think about if you go down that route.

  • Key Takeaway: Personal contract hire and business contract hire are the winners here. You’ll get great access to a variety of cars and the monthly payments should be slightly lower compared to PCP.