PCH (Personal Contract Hire)
Vehicle Contract Hire for Individuals.
This funding method is basically contract hire for the private individual. It is often described as “leasing a car”.
The customer, whilst not owning the vehicle, benefits from PVS’s buying power to drive down the cost of the monthly rental.
Personal Contract Hire can offer a cheaper alternative to PCP because you are benefiting from purchasing terms negotiated with the manufacturer.
Key customer benefits:
- PVS’s buying power drives down monthly rental costs
- Fixed monthly rental that can include additional services, such as maintenance – no cashflow or interest rate fluctuations
- None of the depreciation risks associated with ownership
- The convenience of a full maintenance service, at a fixed monthly cost, is optional
- Road Fund Licence is provided for the full term of the contract.
What is PCH (Personal Contract Hire)?
A Personal Contract Hire (PCH) agreement is an operating lease product offered to non-business customer’s under where the funder accepts responsibility at a fixed cost for depreciation, funding costs, and administration and (usually) the provision of maintenance (if the customer requests it).
It is always regulated by the Consumer Credit Act 1974.
Personal Contract Hire (PCH) will benefit the customer who is seeking to eliminate the financial risk associated with disposing of the vehicle and enjoy the convenience of a full maintenance service (where requested), at a fixed monthly cost.
How does it work?
The monthly rental charged is calculated based upon the cost of the vehicle, the contract period and the anticipated resale value. It is also takes into consideration the predicted mileage, service and maintenance costs, together with any additional services such as relief vehicles.
Under a Personal Contract Hire (PCH) agreement the funder retains ownership of the vehicle at all times and therefore continues to absorb the subsequent risks such as unforeseen running costs and uncertain resale values.
What are the key features?
(a) Excess Mileage
Where an agreed mileage is exceeded during the contract hire period an excess mileage charge will be payable. This is calculated on ‘pence per mile’ set at the start of the contract. Excess mileage is calculated at the end of the contract and invoiced to the customer.
(b) Rescheduling (subject to approval)
The original contract for a vehicle may be revised for an increase of mileage, term or addition of optional services.
Where there is a change to mileage or term of a vehicle the recalculation is made from the start date of the contract resulting in a credit or debit due and a revised rental.
No Changes are allowed in the first 12 months of the contract going live.
(c) Consumer Hire Advertising
The Consumer Protection from Unfair Trading Regulations 2008 ("CPRs"), which came into force on 26th May 2008, amongst other things, stripped the provisions relating to hire advertising from the Advertising Regulations. The prescriptive requirements of the Advertisements Regulations are replaced with the more general principles based regulation set out in the CPRs. The CPRs prohibit unfair commercial practices (which include advertising). Commercial practices will be unfair if they mislead by act or omission. A misleading omission can be a pure omission or an omission by way of hiding important information.
This means it may be possible to be more flexible in terms of hire advertising. For instance, the rule against giving extra prominence to particular items of information will no longer strictly apply.
However, it is still necessary to be careful not to omit such other information or to 'hide' it in small print because that could constitute a breach of the CPRs.
(d) Low Value Contracts
The regulations applying to Personal Contract Hire allow for a customer to cancel their contract with a single months notice after 18 months unless the rentals paid in any year (including all VAT and services) exceed £1500. In such a case, the customer would not be liable for any cancellation charges other than Damage Recharge and excess mileage (MVA) and must be advised of that right on their contract.
What are the financial benefits?
As this is a personal contract offered for non-business use there are no specific VAT or Corporation tax advantages on this product.
What happens at the end on the Contract?
There are a number of different options at the end of the contract.
Whether you want to keep the vehicle or dispose of it you as the Intermediary have the following options:
- Purchase – The Intermediary can arrange a purchase price quote on your behalf, as long as the party buying the vehicle is not the Hirer or their family members. The vehicle is unable to be purchased directly from the person who name the finance is in on the contractual agreement.
- Hand the vehicle back at termination.
- Any damage on the vehicle or missing service history, keys etc will be charged as detailed in the BVRLA ‘Fair Wear & Tear Guides’ which can be found by on this website.
- Formal Extension – The customer contacts you to request extending their existing contract. Re-Quote for 6 or 12 months and ensure all relevant documentation is drawn up and signed as appropriate.
- Informal Extension – The customer continues to run the vehicle on the extension rental for a period. However, it is important to note that in this instance we have the right to request a termination of this hire, and if maintenance is included we have the right to remove this at any time.