Personal Contract Hire..
- Thread starter Chris H
- Start date
Hi Chris
Effectively, if you decide on PCH, the Contract Hire company will treat PCH pretty much the same as they would if they were supplying to a business. They would be putting the car into the contract agreement at a lot lower cost than you could ever buy it, so thats good and of course, could include all of the repairs etc in a single fixed monthly payment and as we all normally only earn the same amount each month, thats perfect.
There will not be any nasty surprises along the way and all you would effectively have to do is insure the car, put the fuel in and top the oil up between services. With the exception of any damage you do to the vehicle, thats all you are responsible for.
However, PCH is designed for the individual, but it is subject to VAT which you cant get back, so your rental will include VAT. From a suppliers point of view, PCH should be good business, but fact is the default rate (people not paying) is so much higher than if the Contract Hire company were supplying the vehicle to a business and from that point of view, I have a feeling that if the economy gets tough, interest rates start to rise and you are finding it tough to pay the mortgage, well it will be the car rental thats the first thing to suffer and you might find current PCH suppliers begin to pull back from this market.
The concept of PCH is fantastic and realistically, every private individual should do it.
If you want to learn more about running vehicles and would like to read some interesting road tests, look up busseyvehicleleasing.co.uk
Effectively, if you decide on PCH, the Contract Hire company will treat PCH pretty much the same as they would if they were supplying to a business. They would be putting the car into the contract agreement at a lot lower cost than you could ever buy it, so thats good and of course, could include all of the repairs etc in a single fixed monthly payment and as we all normally only earn the same amount each month, thats perfect.
There will not be any nasty surprises along the way and all you would effectively have to do is insure the car, put the fuel in and top the oil up between services. With the exception of any damage you do to the vehicle, thats all you are responsible for.
However, PCH is designed for the individual, but it is subject to VAT which you cant get back, so your rental will include VAT. From a suppliers point of view, PCH should be good business, but fact is the default rate (people not paying) is so much higher than if the Contract Hire company were supplying the vehicle to a business and from that point of view, I have a feeling that if the economy gets tough, interest rates start to rise and you are finding it tough to pay the mortgage, well it will be the car rental thats the first thing to suffer and you might find current PCH suppliers begin to pull back from this market.
The concept of PCH is fantastic and realistically, every private individual should do it.
If you want to learn more about running vehicles and would like to read some interesting road tests, look up busseyvehicleleasing.co.uk
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One of our company vechicles is Contract Hire, a VW Transporter van.
Love it, no hassle, no worries, a fixed monthly amount, just insure it and put Diesel in it.
Love it, no hassle, no worries, a fixed monthly amount, just insure it and put Diesel in it.
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My Financial Advisor has recommended PCP. I am now in the middle of an application for a car under this type of agreement.
You can search for a car here:
http://www.sainsburysbank.co.uk/borrowing/bor_carbuying__dri_skip.shtml
You can search for a car here:
http://www.sainsburysbank.co.uk/borrowing/bor_carbuying__dri_skip.shtml
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P
PintoPotts
We have just got our second new Audi on Contract Hire, get an option to buy it at the end of the 3 year period for way less than a 3 year old one would cost, which gives you several options at the end of the term.
Plus, the payments are way less than it would cost to buy it.
It is also pretty much hassle free!
Plus, the payments are way less than it would cost to buy it.
It is also pretty much hassle free!
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I've been looking recently on a personal basis too.
I agree with all the benefits of PCP but for me it only works so long as you commit to buying a new car every three years. If you don't it catches up with you.
I've looked at it just in terms of APR %ages.
Finance throught the dealer 9.5% APR
PCP 9.9% APR
Bank loan 6.2%
So, if you can get the loan and afford the monthly payments you must pay less in the end through the bank loan.
I agree with all the benefits of PCP but for me it only works so long as you commit to buying a new car every three years. If you don't it catches up with you.
I've looked at it just in terms of APR %ages.
Finance throught the dealer 9.5% APR
PCP 9.9% APR
Bank loan 6.2%
So, if you can get the loan and afford the monthly payments you must pay less in the end through the bank loan.
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With PCP you do not have to buy the car at the end of the term. You can exchange for another new car or hand it back and walk away.
On the website I gave above the APR is 8.9% and my financial advisor told me anything less than 8.9% is good for a PCP.
With a PCP you will be given a Guaranteed Minimum Value (GMV) whereas on a HP or loan from the bank there is no guarantee.
I went to a Mercedes dealership and their APR was much higher and the monthly payments also higher for the car I wanted. I am now in the process of applying through Sainsburys Bank (Bank of Scotland) at a much lower monthly payment.
On the website I gave above the APR is 8.9% and my financial advisor told me anything less than 8.9% is good for a PCP.
With a PCP you will be given a Guaranteed Minimum Value (GMV) whereas on a HP or loan from the bank there is no guarantee.
I went to a Mercedes dealership and their APR was much higher and the monthly payments also higher for the car I wanted. I am now in the process of applying through Sainsburys Bank (Bank of Scotland) at a much lower monthly payment.
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Not for the 'A-class' 
Just 3-years hard work and perseverance with no car, now I am due a reward
No?
Just 3-years hard work and perseverance with no car, now I am due a reward
No?
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lol, I've recently been inquiring about a personal contract hire, on a top spec BMW 118d and a Completely top spec Grande Punto 1.9 Sporting....Both with all the goodies, leather, cruise control, heated seats (bmw), bluetooth kit.
I worked out, the Grande Punto, is about 14ish grand...Over the 3 year contract, I will have paid 8 grand!! that's over half of what the cars worth!
I worked out, the Grande Punto, is about 14ish grand...Over the 3 year contract, I will have paid 8 grand!! that's over half of what the cars worth!
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Oh I see, sorry.......
A hairdressers car!!!
Actually I was just kidding. Have applied for the CLK280, all being well should get it in October. Would you believe it my last 2 cars were both a Rover?!
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P
plan-romford
BUT the Sainsbury's site ONLY offers 'PCP' (Business Contract Purchase)...
'PCH' (Personal Contract Hire' or 'BCH' (the Business equivalent) for a lot of people is a far more efficient form of Finance, as it offers complete protection from Vehicle Depreciation, Disposal Losses & as the Lease terms are typically 6-36 months long, your Car is NEVER out of Warranty Period - so you are protected against most nasty repairs as the Vehicle ages.
Also who wants to have to pay a large Final Balloon Payment on a Car that is already 3 or 4, sometimes 5 years old. With Contract Hiring you get a new Car every 24 months on average!
For Businesses it really is a no-brainer...
* you claim 'at least' 50% of the vat back
* 100% tax releif against the monthly rental amount
* No disposal, hassle free motoring under warranty
* Optional Maintenance to cover ALL servicing, tyres, repairs etc.
* No Car Value depreciating on your books
* A New Car every 6, 12, 18, 24 or 36 months, dependant on your lease term
It REALLY is quite an easy decision
See www plan-romford co uk if you want some examples
)
'PCH' (Personal Contract Hire' or 'BCH' (the Business equivalent) for a lot of people is a far more efficient form of Finance, as it offers complete protection from Vehicle Depreciation, Disposal Losses & as the Lease terms are typically 6-36 months long, your Car is NEVER out of Warranty Period - so you are protected against most nasty repairs as the Vehicle ages.
Also who wants to have to pay a large Final Balloon Payment on a Car that is already 3 or 4, sometimes 5 years old. With Contract Hiring you get a new Car every 24 months on average!
For Businesses it really is a no-brainer...
* you claim 'at least' 50% of the vat back
* 100% tax releif against the monthly rental amount
* No disposal, hassle free motoring under warranty
* Optional Maintenance to cover ALL servicing, tyres, repairs etc.
* No Car Value depreciating on your books
* A New Car every 6, 12, 18, 24 or 36 months, dependant on your lease term
It REALLY is quite an easy decision
See www plan-romford co uk if you want some examples
)
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Be aware business wise, that the amount you can claim back is dependent on the worth of the car, the greater the worth, the less the amount you can claim ... if you are doing this business wise, you would need to speak to your Accountant who will tell you if its a feasible option for your business.
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On leases such as you describe for a business the following rules apply ....
Where an asset is a car with an acquisition cost of £12,000 or over, there is a restriction on the amount of rental payments allowed for tax purposes.
Capital allowances are not available.
Where the asset is a car, only 50% of the VAT on the leasing charges can be reclaimed. If identified separately, the VAT on any maintenance element of the contract can be reclaimed in full.
Where an asset is a car with an acquisition cost of £12,000 or over, there is a restriction on the amount of rental payments allowed for tax purposes.
Capital allowances are not available.
Where the asset is a car, only 50% of the VAT on the leasing charges can be reclaimed. If identified separately, the VAT on any maintenance element of the contract can be reclaimed in full.
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P
plan-romford
Think we are talking cross purposes, Gillie.
I am refering to Business Contract Hire. This form of leasing the Car is NOT an Asset & at no time would appear as an Asset on a Companies Books. You are referring to Lease Purchase, which is a different form of Leasing.
For a Vehicle on a Business Contract Hire all Charges are off Balance Sheet & for any company making a profit the Rental & Service elements of the Lease are 100% deductible for any Company making a profit as this effectively reduces the bottom line and therefore Corporation Tax.
VAT on Rentals is claimable at 50% for non-commercial Vehicles or at 100% for commercial vehicles (Vans etc) or if the Vehicle is registered as a Company Pool Car. Vat on Service for all Vehicles is reclaimable 100%...
Hope that clarifies for people. As always any Vehicle Purchases should be discussed with an Accountant - who will be well versed with the benefits of Vehicle Leasing - Contract Hire in particular.
I am refering to Business Contract Hire. This form of leasing the Car is NOT an Asset & at no time would appear as an Asset on a Companies Books. You are referring to Lease Purchase, which is a different form of Leasing.
For a Vehicle on a Business Contract Hire all Charges are off Balance Sheet & for any company making a profit the Rental & Service elements of the Lease are 100% deductible for any Company making a profit as this effectively reduces the bottom line and therefore Corporation Tax.
VAT on Rentals is claimable at 50% for non-commercial Vehicles or at 100% for commercial vehicles (Vans etc) or if the Vehicle is registered as a Company Pool Car. Vat on Service for all Vehicles is reclaimable 100%...
Hope that clarifies for people. As always any Vehicle Purchases should be discussed with an Accountant - who will be well versed with the benefits of Vehicle Leasing - Contract Hire in particular.
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In fact they only offer Personal Contract Purchase, that is what PCP denotes.
PCP is good for those who do not wish to put the car through their business i.e. non-VAT registered businesses.
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P
plan-romford
The main issues I have with PCP is that the buyer is not protected from Disposal Losses when they purchase the Vehicle at term end.. and why would people pay a final payment to own a Vehicle that was already 3, 5 or even 5 years old. The Car is also out of Warranty by this time & the Buyer will almost certainly have to lump Vehicle Repairs etc.
I have spent a lot of time in the States where PCP/HP is now almost redundant.
As famous philanthropist, Paul John Getty said 'Buy what appeciates - Lease what depreciates'
No one would ever dream of buying a House that was going to lose money, anyone thinking of so, would be considered crazy... BUT so many people in the UK, think nothing of going out and paying Cash or getting a Loan out for a Car - when they are GUARANTEED to lose money. WHY????? It just doesn't make financial sense... No argument can possibly say it does... it has been proven beyond doubt. Yet the very conservative UK public throw millions away every year, buying Cars...
A great example is the Ford Mondeo - the latest model is very good, press reviews are very positive. BUT and it is a really BIG but - Repsected 'What Car' estimate that after 36 months & 36,000 miles the vehicle will RETAIN 23% of it's purchase price.
I have spent a lot of time in the States where PCP/HP is now almost redundant.
As famous philanthropist, Paul John Getty said 'Buy what appeciates - Lease what depreciates'
No one would ever dream of buying a House that was going to lose money, anyone thinking of so, would be considered crazy... BUT so many people in the UK, think nothing of going out and paying Cash or getting a Loan out for a Car - when they are GUARANTEED to lose money. WHY????? It just doesn't make financial sense... No argument can possibly say it does... it has been proven beyond doubt. Yet the very conservative UK public throw millions away every year, buying Cars...
A great example is the Ford Mondeo - the latest model is very good, press reviews are very positive. BUT and it is a really BIG but - Repsected 'What Car' estimate that after 36 months & 36,000 miles the vehicle will RETAIN 23% of it's purchase price.
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P
plan-romford
Hey peeps...
PCP is okay BUT I think most of you will, when the facts have been given - will consider PCH (Personal Contract Hire) a MUCH better option.
PCH is an all-inclusive rental package over an agreed period with agreed total mileage, with optional service and maintenance for the private individual. An excellent package for those looking for risk free motoring without the residual risks of ownership.
So basically...
* You will suffer NO depreciation losses - said to be £1000 on most cars when you leave the dealership!
* You can get a replacement vehicle at term end OR just walk away, so a new car - every couple of years, typically
* You have EXACT fixed costs for the whole Lease Term - be it 6, 12, 18, 24 or 36 months
* NEVER pay Road Tax Fund or MOT - this is always included
* You could also take out a maintenance agreeement for a fairly low amount - so NO repair costs
* Your Vehicle is ALWAYS under Manufacturers Warranty.
You CAN'T possibly lose! In 10 years time in the UK, PCP/HP is likely to be a thing of the past, as it is now in the States!!!
John Paul Getty got it right! BUY what appreciates - LEASE what depreciates
No one would ever buy a house that lost money - why do people buy cars that typically lose many, many thousands - most Cars retain ONLY 23-50% of their value after 3 years!
PCP is okay BUT I think most of you will, when the facts have been given - will consider PCH (Personal Contract Hire) a MUCH better option.
PCH is an all-inclusive rental package over an agreed period with agreed total mileage, with optional service and maintenance for the private individual. An excellent package for those looking for risk free motoring without the residual risks of ownership.
So basically...
* You will suffer NO depreciation losses - said to be £1000 on most cars when you leave the dealership!
* You can get a replacement vehicle at term end OR just walk away, so a new car - every couple of years, typically
* You have EXACT fixed costs for the whole Lease Term - be it 6, 12, 18, 24 or 36 months
* NEVER pay Road Tax Fund or MOT - this is always included
* You could also take out a maintenance agreeement for a fairly low amount - so NO repair costs
* Your Vehicle is ALWAYS under Manufacturers Warranty.
You CAN'T possibly lose! In 10 years time in the UK, PCP/HP is likely to be a thing of the past, as it is now in the States!!!
John Paul Getty got it right! BUY what appreciates - LEASE what depreciates
No one would ever buy a house that lost money - why do people buy cars that typically lose many, many thousands - most Cars retain ONLY 23-50% of their value after 3 years!
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I am referring to leasing ie contract hire not lease purchase, and the information I cite is from two different accountants.
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P
plan-romford
I would say, in balance, the benefits of PCH outweigh PCP... especially with the advent of Short Term Contract Hire Leases - we now do 6, 12, 18, 24, 36 month Leases! - so a new Car every 6-36 months.
We are finding that 95% of our sales of now through Contract Hire...
PCP doesn't have the same flexibility, and who wants to an option to buy a 3 year old car anyway, when a new one is now so attainable...
Here is a very article explaining the main differences
There are 2 main car leasing finance methods that fall into the category of personal car leasing. They are Personal Contract Hire (PCH) and Personal Contract Purchase (PCP). These are lease agreements for private individuals and although there are similarities between the 2 methods there are also subtle differences.
Personal Contract Hire
Personal Contract Hire (PCH) is an agreement made between an individual and a car leasing company. The agreement will be to pay fixed monthly payments for the use of a car for a set time period and set mileage. The car is usually returned to the lease company at the end of the lease contract.
Personal Contract Purchase
Personal Contract Purchase (PCP) is a method of funding a vehicle, once again using fixed monthly payments over a set period of time and set mileage. The main difference between Personal Contract Purchase and Personal Contract Hire is in the inclusion of an optional final Balloon Payment. The Balloon Payment allows you to purchase the vehicle at the end of the lease agreement. The value of the Balloon Payment is determined before you sign the lease agreement and is equivalent to the assured minimum projected cost of the car at the end of the contract.
What do PCP and PCH have in common?
Whilst both methods of leasing do have subtle differences they do have these benefits in common:
Next, we will look at the specific advantages of each personal contract option.
Benefits of Personal Contract Hire
The following are further benefits that you would gain from Personal Contract Hire:
Benefits of Personal Contract Purchase
The following are further benefits that you would gain from Personal Contract Purchase:
PCH appeared as an alternative to the company car and allowed employees to use their monthly car allowance to hire a quality car of their choosing. This method of leasing allows the customer to drive a car that it would otherwise be unreachable. The ability to frequently change you car is also an added bonus to many PCH users. PCP, as with PCH, offers the customer low fixed-cost, inflation free motoring. This option is perfect for a customer who would like to purchase a car of their choosing. By paying in monthly instalments for a set period of time, you may then purchase the vehicle buy making a pre-arranged Balloon Payment.
We are finding that 95% of our sales of now through Contract Hire...
PCP doesn't have the same flexibility, and who wants to an option to buy a 3 year old car anyway, when a new one is now so attainable...
Here is a very article explaining the main differences
There are 2 main car leasing finance methods that fall into the category of personal car leasing. They are Personal Contract Hire (PCH) and Personal Contract Purchase (PCP). These are lease agreements for private individuals and although there are similarities between the 2 methods there are also subtle differences.
Personal Contract Hire
Personal Contract Hire (PCH) is an agreement made between an individual and a car leasing company. The agreement will be to pay fixed monthly payments for the use of a car for a set time period and set mileage. The car is usually returned to the lease company at the end of the lease contract.
Personal Contract Purchase
Personal Contract Purchase (PCP) is a method of funding a vehicle, once again using fixed monthly payments over a set period of time and set mileage. The main difference between Personal Contract Purchase and Personal Contract Hire is in the inclusion of an optional final Balloon Payment. The Balloon Payment allows you to purchase the vehicle at the end of the lease agreement. The value of the Balloon Payment is determined before you sign the lease agreement and is equivalent to the assured minimum projected cost of the car at the end of the contract.
What do PCP and PCH have in common?
Whilst both methods of leasing do have subtle differences they do have these benefits in common:
- Small initial deposit.
- Fixed low-cost motoring.
- No risk from residual value loss.
- Ability to hire cars that may not be affordable to buy outright.
- The option to frequently change your vehicle.
Next, we will look at the specific advantages of each personal contract option.
Benefits of Personal Contract Hire
The following are further benefits that you would gain from Personal Contract Hire:
- Road Fund Licence - the Road Fund Licence is included in Personal Contract Hire agreements for the duration of the lease contract.
- Disposal is not an issue - the car is returned to the lease company at the end of the lease agreement and there are no concerns about the car's residual value and also no hassle in looking for a buyer.
Benefits of Personal Contract Purchase
The following are further benefits that you would gain from Personal Contract Purchase:
- Final Balloon Payment - a pre-arranged sum that will allow you to purchase the car at the end of the lease agreement.
- Optional maintenance packages - personal contract purchase offers optional maintenance packages to suit the customer's needs. This will cover any unexpected maintenance costs that arise during the term of the lease.
PCH appeared as an alternative to the company car and allowed employees to use their monthly car allowance to hire a quality car of their choosing. This method of leasing allows the customer to drive a car that it would otherwise be unreachable. The ability to frequently change you car is also an added bonus to many PCH users. PCP, as with PCH, offers the customer low fixed-cost, inflation free motoring. This option is perfect for a customer who would like to purchase a car of their choosing. By paying in monthly instalments for a set period of time, you may then purchase the vehicle buy making a pre-arranged Balloon Payment.
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