Personal Contract Hire (PCH), commonly known as car leasing, has grown rapidly in popularity. For drivers who want a brand-new car every few years without the hassle of ownership, it can be an excellent option — but it is not right for everyone.
What Is Car Leasing (PCH)?
With a Personal Contract Hire agreement, you are essentially renting the car long-term from the finance company. You pay an initial rental (typically equivalent to three to six months of payments) followed by fixed monthly rentals for the duration of the agreement, usually two to four years. At the end, you simply return the vehicle — you never own it, and you cannot purchase it.
The Advantages of Leasing
Lower monthly costs: Because you are only paying for the depreciation of the vehicle during your lease term (not the full purchase price), monthly payments are often the lowest of any finance product.
Always driving new: Most lease agreements are two to four years, meaning you cycle through new cars with the latest technology, safety features, and manufacturer warranties.
Predictable budgeting: Fixed monthly payments and optional maintenance packages make leasing very easy to budget for.
No depreciation risk: You hand the car back at the end, so you are not exposed to falls in residual value.
Road tax included: Many lease deals include Vehicle Excise Duty (VED) for the duration of the contract.
The Disadvantages of Leasing
You never own the car: At the end of the lease, you have nothing to show for the payments made — no asset, no equity, no part-exchange value.
Mileage restrictions: Lease agreements come with strict annual mileage limits, and excess mileage charges can be significant — typically 5–20p per mile over the limit.
Condition requirements: The car must be returned in good condition (fair wear and tear aside). Damage above the BVRLA guidelines can result in charges.
Modifications not permitted: You cannot make any modifications to a leased vehicle.
Early termination is expensive: Ending a lease agreement early usually incurs a substantial early termination fee.
Is Leasing Right for You?
Leasing tends to suit drivers who: cover predictable, moderate annual mileage; prioritise having a new car; do not want the responsibilities of ownership; and value a simple, fixed monthly cost.
It is less suitable for high-mileage drivers, those who want to own their vehicle, or anyone who values flexibility.
Use the Cost4Cars Lease Calculator to model your specific deal, and compare it against HP and PCP to find the most cost-effective option for your circumstances.