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UK PCH vs PCP: Read the SECCI Before You Sign

October 11, 2026
UK PCH vs PCP: Read the SECCI Before You Sign

PCP finances a car towards ownership: you pay a deposit, then monthly instalments, with an optional final "balloon" payment if you want to keep the car. PCH is a straightforward lease: lower monthly payments, no deposit required in some cases, and no option to own the car at the end. If you want to end up owning your car, PCP makes more sense; if you want lower monthly costs and a new car every few years without the hassle of resale, PCH usually wins.

TL;DR:

  • PCP deposits often equal about 10% of the car’s value, while PCH initial rentals commonly equal three to six monthly payments; compare upfront costs.
  • At PCP’s end, you can buy, trade, or return the car, but verify that the quoted balloon is guaranteed rather than an estimate.
  • Set mileage realistically on either agreement, get the excess charge per mile in writing, and confirm how providers prorate allowances when contracts end early.
  • After paying half the total payable, including the balloon, PCP allows statutory termination; PCH has no equivalent right, and early exit can cost heavily.
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Table of Contents

PCH vs PCP at a glance

Both options get you driving a car you don't pay for outright, but the mechanics and the outcome differ sharply. With Personal Contract Purchase, you're borrowing against the car's future value, which is why the paperwork includes a deposit, monthly repayments and a balloon figure. With Personal Contract Hire, you're paying to use the car for a fixed term, full stop.

  • Payments: PCP usually needs a deposit plus monthly instalments; PCH typically needs an initial rental plus monthly instalments.
  • Monthly cost: PCH tends to be cheaper month to month because you're not financing any part of the car's value for future purchase.
  • End of term: PCP gives you the choice to buy, part-exchange or hand back; PCH is return-only, the car always goes back.
  • Best suited to: PCP suits drivers who want eventual ownership; PCH suits drivers who want predictable costs and a new car every few years.

What deposits, monthly payments and balloon figures actually mean

The numbers on a quote can look similar at first glance, but they represent different things depending on which agreement you're looking at. With PCP, you typically put down a deposit, often around 10% of the car's value, then pay monthly instalments that cover the depreciation of the car over the agreement, not its full value. The balloon payment, also called the Guaranteed Minimum Future Value, sits at the end and represents what you'd pay to own the car outright.

PCH works differently. Instead of a deposit, you pay an initial rental that's often worth three to six months of payments, followed by fixed monthly instalments for the rest of the term. Because there's no option-to-purchase built in, the car's full future value never needs financing, which is why monthly payments usually come in lower.

Watch for these additional costs on either agreement:

  • Administration fees charged at the start or end of the contract.
  • Excess mileage charges if you go over your agreed annual allowance.
  • Damage charges assessed against the car's condition at return or part-exchange.
  • Early-termination costs if you need to exit before the agreement ends.

Before signing anything, check the SECCI (Standard European Consumer Credit Information) document and the APR disclosure. The FCA's motor finance review found that brokers don't always explain these clearly, and the SECCI is where the total amount payable, including every fee, should be spelled out in full.

What happens when your contract ends

PCP and PCH part ways completely at the end of the agreement, and knowing what's coming lets you plan rather than scramble.

With PCP, you have three real choices: pay the balloon payment (the GMFV) and keep the car, trade it in against a new deal if the car's market value exceeds the GMFV, or simply hand it back and walk away. That third option only works cleanly if you've stuck to your mileage allowance and kept the car in reasonable condition. Before you commit to any of these routes, check whether the figure quoted to you is a guaranteed buyout price or an estimate, since only the guaranteed figure is binding.

PCH offers no such choice. The car goes back, always, so your focus shifts entirely to minimising charges on return.

  • Request a pre-return inspection a few weeks before the contract ends so you have time to fix anything chargeable.
  • Ask for repair quotes from independent garages rather than accepting the leasing company's first estimate.
  • Check the residual value assumptions baked into your original quote, since they affect what counts as "fair wear" at handover.

How mileage limits and wear-and-tear charges work

Every PCP and PCH agreement sets an annual mileage allowance when you take out the contract, and going over it costs money, usually calculated per mile for every mile above the limit. Lower annual mileage estimates bring the monthly payment down, so it's worth being realistic rather than optimistic when you set this figure.

"Fair wear and tear" is the phrase that causes most disputes at return, so using ceramic coating to protect your car can help minimise visible damage. Scuffed alloys from kerbing, cracked windscreens, and deep scratches through the paintwork are typically chargeable. Faded paint from age, small stone chips, and light scuffing consistent with normal use usually aren't. Contracts ending partway through a year often pro-rate the mileage allowance, and the method used for that calculation varies by provider, which is exactly why it needs to be clear before you sign rather than discovered at return.

  • Confirm your realistic annual mileage before taking out either agreement.
  • Get the exact per-mile excess charge in writing, not just a ballpark figure.
  • Ask how part-year mileage is pro-rated if you think you might end the contract early.

Pro tip: Request the exact excess-mileage rate and the pro-rata calculation method in writing before you sign, not after you've gone over.

Who covers insurance, servicing and repairs

On both PCP and PCH, you're responsible for insuring the car yourself, and that cost sits outside the monthly lease or finance figure on almost every quote. Fuel is also down to you in both cases.

Servicing and maintenance are where the two can diverge. Some PCH and PCP deals offer an optional maintenance package that bundles routine servicing, tyres and sometimes brake wear into a single monthly cost, which can simplify budgeting considerably. Without that package, you're arranging and paying for servicing separately, on top of the lease or finance payment.

  • Confirm whether insurance is included or separate, it usually is separate.
  • Check whether a maintenance package is offered and what it actually covers: servicing only, or tyres and brakes too.
  • Compare quotes on a like-for-like basis, maintenance included versus not included, rather than headline monthly figures alone.

Ending your agreement early: what it actually costs

Contract length matters more than most buyers expect, because exiting early works very differently depending on which agreement you've signed.

PCP is a regulated credit agreement, which gives you a statutory right to voluntary termination once you've paid at least half the total amount payable, including the balloon figure. Hit that threshold and you can hand the car back without further penalty, provided it's in reasonable condition.

PCH offers no equivalent statutory right. Ending a lease early typically means paying a substantial proportion of the remaining monthly payments, and the exact penalty varies by provider and contract wording.

  • If your circumstances might change during the agreement, PCP's halfway termination right offers more flexibility.
  • Ask for the early-termination clause in writing before signing either type of agreement.
  • Consider a shorter initial term if you're unsure about your commitment, rather than relying on early exit.

Working out which option fits your situation

A short checklist turns all of the above into a decision rather than a research project.

  1. Do you want to own the car eventually? If yes, PCP is the only one of the two that gets you there.
  2. What's your realistic annual mileage? High-mileage drivers should model excess charges carefully on both options before comparing monthly costs.
  3. Can you afford a deposit now, or do you want to avoid one? PCH agreements more commonly offer no-deposit terms.
  4. How often do you want to change cars? Frequent changes suit PCH's clean return process better than navigating PCP equity each time.
  5. Do you want fixed, predictable running costs? A maintenance package on either agreement helps, but PCH's simpler end-of-term process adds further predictability.
  6. How much risk are you willing to take on end-of-contract charges? PCP exposes you to buyout decisions and part-exchange valuations; PCH exposes you only to condition and mileage charges at return.

If you answered "yes" to wanting ownership, request a PCP quote and compare the balloon figure against the car's likely resale value. If predictable monthly costs and a new car every few years matter more, request a PCH quote and check the mileage allowance matches your actual driving. Readers unsure about eligibility for either route can check the criteria for car leasing before requesting quotes.

What we see customers miss when comparing quotes

Handling leasing and finance enquiries daily means noticing where quotes often fall short on clarity. The FCA's review of motor finance found that brokers don't always explain clearly that a PCP customer doesn't own the car until every payment, including the option-to-purchase fee, has been made. We set out every quote with the deposit or initial rental, the monthly figure and any balloon payment shown separately, alongside maintenance options, so nothing is buried in a single headline number.

Clarity at the quote stage prevents almost every dispute we see at contract end.

— Jason

The real question isn't PCP or PCH, it's what happens at the end

Most comparisons treat PCP and PCH as a straight monthly-cost contest, which misses the point. The agreement that costs less per month isn't automatically the better deal once you account for what happens when it finishes: a PCP balloon payment you can't afford, or a PCH return inspection that turns up charges you didn't budget for.

PCP balloon payment versus PCH return inspection

Conventional advice tends to focus heavily on upfront costs and monthly figures, because they're the easiest numbers to compare side by side. What gets underweighted is contract wording: how mileage is pro-rated, whether a buyout figure is guaranteed or estimated, and what counts as chargeable damage. These details rarely show up in a quick comparison table, yet they're where the real cost differences emerge months or years after signing.

If you prioritise one thing before signing anything, make it this: read the SECCI document in full and ask for anything unclear to be explained in writing. A cheaper monthly payment on paper means nothing if the end-of-contract terms cost you more than you saved.

Get a transparent PCP or PCH quote from us

We build every quote around fixed monthly payments and clear breakdowns, so you see the deposit or initial rental, the monthly figure and any balloon payment laid out separately from the start. We also offer no-deposit options on eligible agreements and free UK delivery on eligible vehicles, with a dedicated team available to talk through whichever option suits your situation.

Lease World

If you're ready to see real numbers rather than general guidance, get a quote and we'll talk you through the figures before you commit to anything.

FAQ

Is PCH better than PCP?

Neither is universally better, it depends on whether you want to own the car. PCH typically suits drivers who want lower monthly payments and a new car every few years, while PCP suits those planning to buy the car outright at the end.

Is PCH cheaper than PCP?

PCH monthly payments are usually lower because the agreement doesn't finance any part of the car's value for future purchase, according to MoneyHelper. However, a PCP deal with maintenance included can sometimes work out similar once you compare like-for-like inclusions.

Is PCH the same as hire purchase?

No, PCH and hire purchase are different agreements. PCH is a lease with no ownership option at any point, while hire purchase is a credit agreement that leads to automatic ownership once every instalment has been paid.

Is a PCH a good idea?

PCH works well if predictable monthly costs and a straightforward return process matter more to you than eventual ownership. It suits drivers who prefer changing cars regularly and want to avoid dealing with resale value or part-exchange negotiations.

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