Personal Contract Hire
- Rated 4.9/5 on Feefo
- FCA authorised, FRN 315268
- BVRLA leasing broker member
- Part of Global Vehicle Group
Personal contract hire is long-term car hire. You pay a fixed monthly rental for an agreed number of years and miles, the finance company owns the car throughout, and you hand it back at the end. You never own it and you cannot buy it. This page covers how it works and, just as importantly, the parts that catch people out.
Key facts
- You are hiring, not buying. There is no option to purchase the car at any point.
- You agree a term and an annual mileage at the start. Going over costs you a set amount per mile.
- Road tax is included for the whole agreement. Insurance is not, and you must arrange it.
- The car is inspected on return against the BVRLA fair wear and tear standard.
- Voluntary termination does not apply. The "hand it back at 50%" right covers hire purchase and PCP, not personal leasing.
- Ending early means paying a settlement figure set by the finance company. It is rarely good value in the first half of the agreement.
- You are not exposed to what the car is worth at the end. If used values collapse, that is the finance company's problem, not yours.
- Maintenance can usually be added for a fixed monthly amount, covering servicing, tyres and wear items.
How personal contract hire works
You choose the car, how long you want it and how many miles a year you will do. The finance company buys it and hires it to you for that period at a fixed monthly rental. Most agreements begin with an initial rental equivalent to three, six or nine monthly payments, then run for two to four years.
Your monthly payment reflects how much value the car is expected to lose over your term, not what the car costs. That is why a car that holds its value well can cost less to lease than a car with a lower list price that does not.
At the end you hand it back. There is no final payment to make, no car to sell and nothing to negotiate. If you want another car, we arrange the next one to arrive as the old one leaves.
The thing almost everybody gets wrong: you cannot voluntarily terminate
This is the most important paragraph on this page, so it is near the top rather than buried.
Most drivers have heard that you can hand a finance car back once you have paid half of what you owe, and walk away. That right is real. It is Section 99 of the Consumer Credit Act 1974, it is called voluntary termination, and it applies to hire purchase and personal contract purchase.
It does not apply to personal contract hire. A lease is a hire agreement, not a credit agreement leading to ownership, and voluntary termination is not part of it.
There is one statutory right for consumer hire agreements, under Section 101, allowing a hirer to end the agreement after 18 months. But it does not apply where payments exceed £1,500 in any year, which is £125 a month. Almost every car lease is above that threshold, so in practice the right does not help lease customers.
What that leaves is this. If you need to end a personal lease early, you pay a settlement figure. It is set by the finance company under the terms of your agreement, it is contractual rather than statutory, and in the first half of an agreement it is usually a substantial sum.
None of that makes leasing a bad choice. It makes it a commitment, and you should go into it knowing that. If there is a realistic chance you will need to get out early, tell us before you order and we will talk about whether a shorter term or a different agreement suits you better.
Excess mileage, and why under-estimating is the expensive mistake
Your agreement sets an annual mileage. Every mile above the total allowance across the whole term is charged at a rate written into your contract, usually quoted in pence per mile.
People consistently under-estimate. It feels prudent, because a lower mileage means a lower monthly payment. But the excess rate is almost always higher than the extra you would have paid to contract for the miles up front, so guessing low to save a few pounds a month is usually a false economy.
The honest way to do it is to look at what you actually drove last year, not what you hope to drive. Then add the trips you know are coming. We will quote you at two or three different mileages so you can see the difference before you decide, and we would rather you contracted for more miles than you need than be caught at the end.
One thing worth knowing: excess mileage is assessed on the total across the agreement, not year by year. A heavy year followed by a quiet one evens out.
Fair wear and tear, in plain terms
When the car goes back it is inspected against the BVRLA fair wear and tear standard. That is an industry document, it is published, and you can read it before you order rather than after. We will send it to you.
The principle is straightforward. Damage that a car naturally picks up over three years of normal use is acceptable. Damage caused by neglect or accident is not.
In practice, light scratches within the standard's size limits, small stone chips and minor interior marks are generally fine. Kerbed alloys, cracked glass, dents beyond the permitted size, torn upholstery, missing service history and missing keys are generally chargeable.
Two practical points that save people money. Get the car professionally cleaned before collection, because a dirty car makes minor blemishes look worse to an inspector. And if you know something needs fixing, getting it done yourself beforehand is often less than the funder will charge.
If your circumstances change
Life happens over three years. Redundancy, relocation, illness, a new baby, a relationship ending. It is worth knowing what your options actually are, because the answer is not "nothing".
Talk to the finance company early. If you are struggling to pay, contact them before you miss a payment rather than after. Lenders regulated by the FCA are required to treat customers in financial difficulty fairly, and there is far more they can do at the start of a problem than at the end of one.
Early settlement. You can ask for a settlement figure at any point. It will usually be a large sum early in the agreement and reduces as you get further through.
Transferring the agreement. Some funders permit a lease to be transferred to another person who passes their credit checks. Many do not, and there is normally a fee. Ask before you assume.
Reducing your mileage. If your driving has dropped, some funders will re-rate the agreement to a lower annual mileage and reduce the payment. It is not universal, but it costs nothing to ask.
If you are worried about affordability, the free services at MoneyHelper and Citizens Advice are genuinely good and independent of anyone trying to sell you a car.
What is included, and what is not
| Item | Included? |
|---|---|
| Road tax for the full term | Yes |
| Manufacturer warranty | Yes, for its normal duration |
| Free UK delivery to your door | Yes |
| Servicing, tyres and wear items | Optional maintenance package |
| Insurance | No. You arrange it, fully comprehensive |
| MOT after three years | No, unless in a maintenance package |
| Fuel or charging | No |
| Option to buy the car | No, and there is no way to add one |
Personal contract hire against PCP
These two are the realistic choice for most private drivers, and they behave very differently.
| Personal contract hire | PCP | |
|---|---|---|
| Can you own it? | No, never | Yes, by paying the final balloon |
| Type of agreement | Consumer hire | Regulated credit |
| Voluntary termination at 50% | No | Yes, under s.99 CCA |
| Typical monthly cost | Usually lower | Usually higher |
| Mileage limit | Yes | Yes |
| Equity if the car is worth more | None, it is not yours | Yes, usable against your next car |
| Road tax included | Yes, whole term | First year only |
The short version: choose PCH if you want the lowest fixed monthly cost and no interest in ownership. Choose PCP if you want the option to own the car, or you value the flexibility that voluntary termination gives you.
When personal leasing suits you, and when it does not
It suits you if you like a new car every few years, your mileage is predictable, you want one fixed monthly cost with road tax included, you have no wish to own the car, and you are comfortable committing for the full term.
It does not suit you if you want to own the car eventually, your mileage is genuinely unpredictable, you keep cars for six or seven years, there is a realistic chance your circumstances will change substantially, or you would want the ability to hand the car back part-way through. In those cases PCP or hire purchase will serve you better, and we will say so.
How Intelligent Vehicle Finance arranges it
Intelligent Vehicle Finance is a credit broker. We do not lend and we do not own the cars. We take what you need, compare it across our panel of funders, and put the options in writing so you can compare properly.
We work by telephone rather than through an online configurator, because the questions that decide whether a lease is right for you are not tick-boxes. What your real mileage is. Whether you might move house. Whether you actually want to own a car at the end. Those conversations take five minutes and save people a great deal.
Intelligent Vehicle Finance is also part of Global Vehicle Group, whose brands have funded more than 70,000 vehicles, so behind the personal service sits genuine group scale.
Speak to us on 01752 429950, or request a callback and tell us when suits.
Frequently asked questions
Can I hand a personal lease car back early under voluntary termination?
No. Voluntary termination is Section 99 of the Consumer Credit Act 1974 and it applies to hire purchase and personal contract purchase, which are credit agreements leading to ownership. Personal contract hire is a hire agreement, so it is not covered. Section 101 gives a right to end a consumer hire agreement after 18 months, but not where payments exceed £1,500 in any year, which is £125 a month, so almost every car lease falls outside it. To end a personal lease early you pay a settlement figure set by the finance company.
How much does it cost to end a personal lease early?
It depends on your agreement and how far through it you are. The finance company will give you a settlement figure on request. Early in an agreement it is usually a substantial sum, and it reduces as you get further through the term. There is no statutory formula, because this is contractual rather than a legal right. If there is a realistic chance you will need to exit early, discuss it with us before you order rather than after.
What happens if I go over my agreed mileage?
You pay an excess mileage charge, quoted in pence per mile in your agreement, on every mile above your total allowance for the whole term rather than year by year. The excess rate is usually higher than the cost of contracting for those miles at the outset, so under-estimating to reduce the monthly payment is normally a false economy. Base your mileage on what you actually drove last year and ask us to quote at two or three levels.
What counts as fair wear and tear?
The car is assessed against the BVRLA fair wear and tear standard, a published industry document we can send you before you order. Broadly, damage a car naturally picks up over normal use is acceptable, and damage from neglect or accident is not. Light scratches within the size limits, small stone chips and minor interior marks are generally fine. Kerbed alloys, cracked glass, larger dents, torn upholstery, missing service history and missing keys are generally chargeable.
Is insurance included in a personal lease?
No. You arrange your own fully comprehensive insurance and it must be in place before the car is delivered. Road tax is included for the full term, and the manufacturer warranty applies as normal. Servicing, tyres and other wear items can be added through an optional maintenance package for a fixed monthly amount.
Can I buy the car at the end of a personal lease?
No. Personal contract hire has no purchase option and one cannot be added, because that would make it a different type of agreement altogether. If owning the car matters to you, look at PCP, which gives you an option to buy at the end, or hire purchase, which leads to ownership outright.
What if I lose my job or my circumstances change?
Contact the finance company early, before missing a payment rather than after. Firms regulated by the FCA are required to treat customers in financial difficulty fairly, and there is far more they can do at the start of a problem. Options may include an early settlement figure, transferring the agreement to someone else who passes credit checks where the funder permits it, or in some cases re-rating to a lower mileage. Free, independent help is available from MoneyHelper and Citizens Advice.
Does a personal lease affect my credit file?
Yes. A personal contract hire agreement is a financial commitment and the finance company will carry out a credit check before approving it. The agreement and your payment history will normally appear on your credit file, so paying on time helps and missed payments do not.
This page is general information about how personal contract hire works and is not advice. The terms of your own agreement, including excess mileage rates, end-of-contract charges and any early settlement figure, are set by the finance company and will be set out in your documentation before you commit. Please read it. Intelligent Vehicle Finance is a credit broker, not a lender, and receives a commission from the lender or funder when an agreement completes. A trading style of XLCR Vehicle Management Ltd, authorised and regulated by the Financial Conduct Authority (FRN 315268). Subject to status and availability. Reviewed by Stacey Smith, Brand Director, Intelligent Vehicle Finance. Last updated: July 2026.