Personal and Business Contract Hire Explained

What is Contract Hire?

Personal Contract Hire (PCH) or Business Contract Hire (BCH) allows you (the lessee) to choose the vehicle you want, use it for a set period of time and then give it back to the leasing company (the lessor) at the end of the period of hire. You will pay a fixed monthly rental payment for a fixed period of time, this is based on a fixed annual agreed mileage.

Some PCH and BCH agreements include Annual Vehicle Excise Duty (road tax). Service and maintenance plans are optional but can also be added to the contract.

You are not responsible for the disposal or sale price of the vehicle at the end of the contract. The car is owned by the finance company, you have no option to buy it, and you can not sell it. All rentals will attract VAT at the current rate.

Summary

Initial Rental
Advance Rentals are usually paid at the start of the agreement, these are normally agreed by the lessor and lessee, but 3 and 6 advance rentals are most common.
Fees
The Lessor may charge additional fees, such as arrangement fees. If you are VAT registered, the VAT on the rentals can be wholly or partially reclaimed by the lessee.
Restrictions
You will pay for any excess mileage charge if you have exceed your agreed mileage and/or if the vehicle is not maintained and kept in good condition. The vehicle must be fully insured as well as in a good roadworthy condition.
Ending the Agreement
Once your agreed contract term has run out you can extend the lease on the car or you can choose to hand the car back, subject to restrictions. If you settle early there maybe penalties for doing so.

Advantages of Personal or Business Contract Hire

  • Often the lowest upfront and monthly cost for a brand new car.
  • Full manufacturer’s warranty (please note this may expire before the end of the contract).
  • Road tax, breakdown cover, and servicing often included.
  • You pay monthly rentals and then hand your car back to the finance company at the end of the contract.
  • If you've got your own business and are VAT registered, you maybe claim an element of the VAT back

Disadvantages of Personal or Business Contract Hire

  • You won't own the car – you are just the driver for the term of the agreement.
  • Limited mileage. Excess mileage charges range from 3p to 50p per mile.
  • You will be charged if there is damage to the car.
  • If the car is written off, and the insurer's value is less than the leasing company's, you may be liable for the difference.
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Jigsaw Finance Limited and associated trading styles is a Credit Broker not a lender and is authorised and regulated by the Financial Conduct Authority (FRN 679612). We work with a limited panel of lenders, who may offer different interest rates and charges. We are only able to offer finance products from these providers. Our lender selection process is structured to balance lender efficiencies with customer approval rates. We operate on a non-advised basis, meaning we do not provide financial advice or make recommendations. Instead, we explain key features of available finance products, and you decide whether the product is suitable for you.

We do not charge you a fee for our service; instead we receive a commission payment from lenders for arranging finance on your behalf. The commission we receive may vary depending on the lender and product. The commission we receive from the lender and pay to the introducer impacts the amount you pay.

As a credit broker with a limited panel of preferred credit providers from whom we receive commission, Jigsaw is not impartial and we may be influenced by the amount of commission we earn. Although we receive commission from lenders, we aim to provide finance solutions that meet our customers' needs.

The amount earned by Jigsaw and the motor retailer including how it has been calculated will be disclosed prior to signing your agreement. Full details of this can be found in our Initial Disclosure Document.

If you have any questions about how we are paid or how we select lenders, please ask before proceeding.