Latest news

Is contract hire right for you?

If you’re looking into your options for financing a new car, there are a number of ways you could go. A popular choice for many drivers is personal contract hire, also known as PCH, or leasing. We explain what it means to take out a PCH agreement and some of the benefits, to help you decide if it’s the right route for you.

What is contract hire?

Essentially, PCH is a long-term rental agreement on a vehicle. You can choose the length of the agreement, and you will pay a set monthly fee (plus an advance payment when your agreement starts) for the agreed time period. Leases can usually range between anything from two to five years.

In some PCH agreements, the monthly fee also includes servicing and maintenance costs for the vehicle, plus breakdown cover and road fund license (car tax) for the contract duration. As the car you lease is usually brand new, it is covered by the manufacturer’s warranty, as it would be if you’d bought it.

What options do you get when choosing a lease car?

When you take out a contract hire agreement, you can usually choose the exact model of car, specification, options and extras you want, in the same way as if you were buying the vehicle conventionally. You choose the length of contract and the estimated annual mileage you think you will do. Then you will receive a quote for your monthly payments and can apply for the PCH agreement.

What are the benefits of contract hire?

With contract hire, you will never own the vehicle, nor have an option to buy it at the end of the contract term. Once the term ends, you hand the vehicle back and move on. This means that you never have to worry about how much the vehicle has depreciated over the time you have leased it or think about balloon payments. You can simply start a new lease agreement for a new vehicle if you wish.

Some of the benefits of leasing include:

Knowing what your monthly car costs will be

If you have a lease that includes service and maintenance, as well as road fund license and breakdown cover, the only car-related costs you’ll need to think about are insurance and fuel. This can help with budgeting and means you won’t get any unexpected car bills.

You’re able to enjoy driving a new car each time you opt to contract hire

You can order a brand-new car each time you take out a new lease agreement, so this could mean that you can drive a brand-new vehicle every 3-4 years, without needing to worry about what significant car maintenance is needed as vehicles get older. If you’re always able to drive a newer and reliable car, along with the latest technology and safety features, there is less chance that your vehicle will need major repairs during the period of time that you drive it.

What restrictions are there with contract hire?

If you lease your vehicle, there are some limits and restrictions to bear in mind. For example, you will need to stick to the estimated mileage that was agreed at the start of your contract. If you do exceed the agreed mileage, you will usually be charged extra when you return the vehicle. It’s usually more cost effective to set a higher mileage limit at the start of the agreement than ‘pay for additional miles’ after the fact. You’ll also need to return the car in good condition, although fair wear and tear is not usually an issue. If the car needs other types of damage repairing, you may be charged for this.

If you intend to take your leased car abroad, you’ll need to ensure that your contract allows this, and you won’t be allowed to make any modifications to your vehicle (such as adding a tow-bar) without asking your lease company for permission first.

If you fall behind with your monthly contract hire payments, your vehicle can be repossessed.

If you are considering contract hire for your next vehicle, contact your nearest Hatfields retailer.