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PCP & PCH – Your guide to having a car without a hefty burden of owning it

Author: crosspay   |   May 25, 2020

PCP and PCH are two of the best options available in the United Kingdom to have a car for yourself without stressing over high monthly installments or life-long commitment. Thanks to their flexible options; these deals enable many to realise their dreams of having their own car.

Here is a brief guide to PCP and PCH:

PCP

Personal Contract Purchase or PCP is one of the most beneficial ways of having a car for yourself; where you will be paying for the depreciation cost but not the true value of the car itself. It is a kind of Hire Purchase agreement with the benefits of lower deposits and monthly payments. Here, you will have an option to choose the number of months that you would like to keep the car; generally, it has a minimum period of 24 months to a maximum of around sixty months.
Many PCP lenders also provide insurance, warranty, tax, service and assistance. It really comes in handy when you want to have a car for a certain period of time. PCP has an additional benefit of flexibility as the total cost of the car is put off to the end of the contract. At the end of the contract period, if you want to own the car you can do so by paying off the Guaranteed Future Value (GFV).
Once your deal or contract ends; you will generally be given 3 options. They are as following:

• Exchange your current vehicle with a new one(new contract)
• Return your vehicle without paying anything(unless there is any damage or breach of the contract)
• Own the car fully by paying off the GFV

GFV or Guaranteed Future Value of the car is the value of a car at the end of the contract period; which is derived by considering the status of maintenance and the miles driven in the contract period. So, in simple terms during the contract period of PCP, you will be paying off the difference between the current value minus the future value or GFV.
With PCP you can drive your desired car for the contract period; if you still love to have it after the end of the contract period you can do so by paying off the GFV.

PCH

PCH is one awesome deal of using a car for a fixed period of time without even worrying about depreciation value or what to do with the car after the fixed period. In simple terms, it is leasing a car by paying some amount on a monthly basis and lower initial deposit.
PCH is a cost-effective way to drive a new vehicle and nothing do with a drop in the value of the car which comes after owning a vehicle. Some PCH lenders also include service, maintenance and repairs; given that you follow the allowed mileage and other requirements in the contract period. With PCH, you will have a brand new vehicle in your hand to drive with lower monthly payments and no worries of selling or losing the value of the car after the end of the contract period.
Since PCH and PCP have fixed monthly payments; you can choose the one that fits your budget and whether you do or do not want to own the car after the contract period.
In order to avoid any extra charges both in PCP and PCH; you are to follow the British Vehicle Rental and Leasing Association (BVRLA) ‘Fair wear and tear’ conditions. If your mileage exceeds the given limit or if there is any damage or breach of the contract, you must pay the extra amount as listed in the agreement. In some cases, if you want to terminate the contract early you might have to pay some or the total amount remaining in the contract.
The very general requirements of PCP and PCH are: you need to be 21 years or old with two or three years of employment history and a good credit score.
Note: In either case, if there is any serious damage which cannot be covered by the agreed insurance policy or the lender’s agreement then you are liable to pay for the damages from your pocket.
It is always advisable to get sound advice (professional where possible) before entering any of these contracts to understand the implications and make sure you always read the fine print.