What is Personal Contract Hire?

Emily Hanson 4 minutes Published: 06/05/2022

You’re interested in personal contract hire, but don’t know how it works. Is it the most affordable option for you? Are you eligible?

In this guide, we explore what personal contract hire is. 

We'll discuss who it's for, the pros and cons, how it compares to other car finance methods, eligibility, costs, and how contracts work. If you decide it's for you, you can compare personal car leasing deals easily through Lease Fetcher!

What is personal contract hire?

Personal contract hire (also known as personal car leasing) is aimed at individuals rather than businesses. 

During your contract (on average 2-4 years), you pay the amount the car depreciates. When your contract ends, you hand the car back and you never have the option to buy it.

It’s a great choice if you’d like a brand new car for low monthly payments.

Who is personal contract hire for?

Personal contract hire is aimed at anyone looking to get a brand new car for personal use, for a low monthly cost.

If you're a business owner and need a car for both personal and business use, business leasing may be best. Check our guide to how business car leasing works.

What are the benefits of personal car leasing?

There are some important pros and cons to leasing to consider. Here are the main benefits:

  • You get a brand new car. No need to worry about the car's history or previous wear and tear!
  • You pay fixed monthly payments. Your agreed monthly payment won’t change.
  • You have access to cars with better specs. Leasing is cheaper than buying so you can get pricier models you might not afford otherwise.
  • You get a new car every 2-4 years. Keep up with the latest car technology!
  • You don't have the hassle of reselling. You'll never own the car - you just hand it back to the leasing company!

Restrictions with personal contract hire

Personal contract hire isn't for everyone. Below are some features you might consider drawbacks of leasing.

  • You have a pre-agreed mileage limit. You pay an excess mileage charge for every mile above your limit.
  • You have to pay for excessive damage. You pay lease car return charges for damage beyond “fair wear and tear”.
  • You can't modify the car. Modifications affect depreciation. You can get a private plate.
  • You never own the car. Unlike other finance methods, you can’t buy the car if you love it.

How do PCH and PCP and HP differ?

This table summarises the main similarities and differences between PCP vs leasing and hire purchase vs leasing.

Leasing offers the lowest monthly payments since you’re not working towards ownership. We’ve written a guide about whether you should lease or buy a car.

Option to own the car when contract endsX
Need a deposit*X
Monthly payments are fixed
Mileage limitXX
Can easily end the contract after paying 50%X

* 1 month initial rental deals are available which is the same as your first monthly payment, so no extra deposit.

Am I eligible to lease a car?

To lease a car in the UK, you must:

  • Be 18 or older.
  • Have a full, valid UK driving licence.
  • Have a credit score of "good" or better (there are exceptions - see the next section).

You can read more about what you need to lease a car.

Can I lease a car with a bad credit score?

When you apply, you have to pass a car lease credit check. Most companies will only accept you with a credit score of "good" or above. 

Some companies offer deals for people with poor scores. These deals are often more expensive and only for cheaper models.

Can I lease a used car?

You can lease a used car but we advise against it. It's likely the car is no longer under warranty and you'll have to deal with higher maintenance costs. You also don’t have access to the latest tech. This outweighs the cheaper monthly cost compared to new lease cars.

How much does it cost?

The cost to lease a car is based on how much it depreciates during your contract. On average, this is 40% over 3 years.

Depreciation is based on:

  • The model - the trim, add-ons, etc.
  • Contract length.
  • Estimated mileage.

The cost includes road tax, VAT, interest, and a car lease maintenance package if you choose this. Insurance is not included.

Your payments are divided between an upfront payment called an initial rental and your monthly payments.

Can I cancel a personal lease before my contract ends?

You can end your car lease early. The process/costs depend on your reason and how far you are into your contract:

Why Outcome
Any reason up to 14 days after signing the contract. No penalties.
Car fault found within 30 days. No penalties.
Car fault found within 6 months. Leasing company has one chance to fix/replace it. If they can’t, you can cancel with no penalty.
Any reason not related to car faults after 14 days (finances, medical, suspended from driving, etc). 50-100% of the remaining lease payments, termination fee, other charges related to readying the car for sale.

What happens at the end of a lease?

When your lease ends, an inspector will visit to look over the car.

They use the BVRLA guidelines to check for issues beyond "fair wear and tear". They will also check if you've exceeded the mileage limit.

If you have to pay extra charges, you'll receive a bill within 4 weeks of handing the car back.

You may already have arranged a new contract, so now you're free to drive this new car!

Interested in a personal car lease?

If personal contract hire sounds good to you, Lease Fetcher is here to help!

You can compare personal car leasing deals from brokers all across the UK. No need to visit multiple sites and phone multiple numbers for quotes - do all your checks here with us!