What happens at the end of a personal contract hire (PCH) agreement?

Last updated October 12, 2021

If you’re thinking of financing a car through personal contract hire, or you have already got a lease and are wondering what will happen at the end of your contract, you will generally just hand the car back to the finance company who will then take your car to auction or sell it to trade. However, this isn’t always the case and our article will explain what will happen at the end of your lease.

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What is a PCH agreement?

Personal contract hire, also known as personal leasing, is a finance option when acquiring a new car. Similar to more traditional finance options, such as PCP and HP, you will generally pay a deposit followed by regular monthly payments for the duration of your agreement, which is usually 24, 36, 48 or 60 months. At the end of the lease, you will hand the car back to the finance company, who own the car for the duration of the agreement.

What happens at the end of a PCH agreement?

When you take out a personal contract hire agreement, you are just leasing the vehicle for the duration of the contract. Unlike PCP, there is no balloon payment at the end of the contract which gives you the option to own the car. Instead, unless you come to an alternative arrangement with the finance company, you will give the car back at the end of the agreement.

At the end of your lease, you will generally agree to a time for the car to be collected with the finance company around the end date on your contract. When they come to collect the car, they will inspect it for any damage – if there is any damage above what is deemed ‘general wear and tear’, you will have to pay a fee. Furthermore, if you have exceeded the annual mileage on your agreement, you will pay a fixed fee per mile over the threshold, which will be set out in your contract.

Can I purchase my car at the end of a PCH agreement?

If you have fallen in love with your car over the course of your lease, you may not want to hand over the car to the funder at the end of your agreement. Whilst there is no option to purchase the car at the end of the agreement written into the contract, it can sometimes be possible to purchase the vehicle depending on the funder and individual circumstances. If you want to purchase your car at the end of the PCH agreement, you will need to get in touch with the lease broker or funder to discuss your options and whether it is a possibility.

Can I extend my PCH agreement at the end of the contract?

Circumstances may mean that you want to extend your vehicle at the end of the lease agreement. Similar to purchasing a leased car, whether you are able to formally or informally extend your PCH agreement will depend on the funder. If they do agree to extend the agreement, the finance company may charge a one-off admin fee and the cost of the monthly payments may change depending on the circumstances. To find out if you can extend your lease, you should contact the broker or funder to discuss your options and whether it makes financial sense if it is a possibility.

Benefits and Drawbacks of a PCH agreement

Benefits

  • You will not have to worry about depreciation, which may be a considerable cost when buying a new car.

  • You can change your car every few years to a brand new car by taking out a new lease.

  • As you will be leasing a new car, it will generally be covered by warranty should anything go wrong.

  • PCH agreements will often include the option of a service plan, therefore you would just have one monthly cost rather than potentially having large one-off costs if something goes wrong.

  • When leasing a vehicle, you will not have to worry about the process of selling it as you are only paying for the use of the car rather than ownership.

Drawbacks

  • You don’t own the car and there is no option to purchase the car at the end of your agreement.

  • If you are unable to keep up with your monthly payments, the finance company can terminate the agreement and take back the car.

  • There are fees should you go above your agreed maximum mileage; therefore it is important not to underestimate annual mileage when signing up for a PCH agreement.

  • Any damage to the vehicle when handing it back you will be charged for, so it would be beneficial to get any repair work done before you return the vehicle

  • You may be able to terminate the agreement early, however, this will be subject to a termination fee.