What's the difference between PCH and PCP?

What's the difference between a PCP and a PCH finance contract?

Asked on 26 October 2020 by Samuel Cochrane

Answered by Georgia Petrie
There are a few differences - though I'd advise looking into each in more detail before you decide which suits your financial situation best. A PCP (Personal Contract Purchase) will require a deposit, while a PCH (Personal Hire Contract Hire) shouldn't require a deposit. Monthly PCP payments often cost less than on a PCH - but you don't own the car and don't pay a balloon payment at the end of a PCH. At the end of a PCP, you can choose to own the car (by paying off a balloon payment, return it or part-exchange it for a new model). You're tied into the full duration of a PCH contract unless you pay off charges for ending it early, but you can choose to end a PCP early by paying off the difference between the value of the car and what you still owe.

PCH is a type of long-term rental that will suit you if you’re not looking to buy the car at the end of your contract and won’t need to change the car before the end of the contract.

With PCP, your monthly instalments are paying off the depreciation of the car, and not its entire value, over the course of the contract. So, if your car is worth more than the Guaranteed Future Value (which is worked out at the start), then you can use that equity towards a deposit on a new car.
Tags: pcp finance pch
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