Personal Contract Hire (PCH) or personal car leasing is a long-term contract in which you lease a vehicle for a set period of time. This is usually between 2, 3 or 4 years.
An initial payment or a deposit has to be made at the start of the lease, this is followed by fixed monthly installments. Once the agreed period is over, you just have to hand back the keys. With this finance option, you’re just paying off the depreciation value.
Car leasing would be the best option for you if when you're focused on affordability, value for money and happy to return the vehicle at the end of the lease.
With Personal Contract Purchase (PCP) gives you three options, you can return the vehicle, you can purchase it, or you can use it as part exchange for a new vehicle.
PCP is a long-term rental agreement. Similar to PCH, you have to make an initial payment followed by fixed monthly payments. If you decide to keep the car at the end of the contract, you will also have to make a final payment that will cover the full remaining value of the car, often called a balloon payment.
With PCP, you are effectivly paying the vehicle's depreciation value as well as the interest calculated on the total value of the vehicle. If you decide to purchase the vehicle, then you’ll also be paying the Guaranteed Future Value (GFV) of the vehicle, which in some cases may be more than the actual value of the vehicle.
In this type of arrangement, you purchase a vehicle by making an initial deposit followed by monthly payments that continue for between 1-5 years. When the vehicle is paid in full, it is yours to keep.
In Hire Purchase, you are simply hiring a vehicle until the final payment. When the final payment is done, you become the owner.
A personal loan is a loan taken from a bank with a fixed or varied rate of interest for an agreed term. Any loan must be repaid in full regardless of whether you sell the car or not.