![]() PCH contracts typically last for two or three years, with an agreed mileage limit of around 10,000 miles a year. The word ‘hire’ tells you what PCH is all about, because you’re basically renting a car. Personal contract hire (PCH)Īlso referred to as personal leasing, Personal Contract Hire (PCH) was rated as the fourth most popular car-financing method in the poll. Go for HP if you say yes to one or more of these statements: you want to eventually own the car your budget and circumstances suit fixed monthly repayments your disposable income is likely to decrease over the agreement term (for example, if you’re planning a family) you like low-risk credit that is secured against the car only you don’t mind not owning the car until the debt is fully repaid. ![]() If you need to sell the car before the end of the agreement, you’ll have to repay the outstanding debt first – and ‘early settlement’ fees may apply. The credit on an HP agreement is secured against the car, so it’s similar to dealer finance in that the only the car can be seized if you default on the payments. The finance company can take action against the seller if they wish, but not the buyer. The good news for buyers of cars with outstanding HP finance is that the law clearly protects private purchasers who buy vehicles that are subject to undisclosed HP agreements. Nevertheless, some people do sell cars on hire purchase deals before the final payment has been made, without the legal right to do so. Up to that point, you don't own the vehicle and you have no legal right to sell it. HP agreements can include and ‘option to purchase’ fee, which you may have to pay to formally become the owner of the car at the end of the term. You have to pay a deposit with an HP deal, which is usually around 10%, followed by fixed monthly payments. It was the third most popular choice in the poll, scoring 16%. This amount is the car’s guaranteed future value, or GFV, which is set at the start of the agreement.Īfter a bank loan, hire purchase (HP) is the simplest way to buy a car. If you keep the car, you have to make a final ‘balloon’ payment. In either case, there’ll be an excess to pay. The first option, returning the car, costs nothing unless you’ve exceeded an agreed mileage limit or failed to return the car in good condition. Where PCP differs from HP is at the end of the term, when you have three choices: You can return the car to the supplier, keep it or trade it in for a replacement. PCP is a bit like hire purchase (HP) in that you pay a deposit, the interest rate is fixed and the monthly repayments are offered over a choice of lending terms, which are usually between 12 and 36 months. Personal Contract Purchase (PCP) was ranked as the second most popular car-buying method in our poll, accounting for 25% of the votes. ![]() Visit What Car? Finance by clicking here. To help you find the right deal for you, What Car? has a car finance comparison tool that lets you compare more than 300 products from 15 different lenders, all in one place.
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