Personal Contract Hire vs Business Contract Hire


author image - crispin

By Crispin O'Toole-Bateman

on Friday 31 May 2019


Man in shirt and blazer driving a new van

The first question you have to ask yourself when considering the difference between personal leasing and business leasing, is how you feel about sitting at the wheel of a brand-new car that’s fully equipped, under warranty, and yours for the next three years, at which time, you can upgrade to something even more impressive.

Does the idea feel great?

The next question is, who do you want to pay for it? And who do you want to control it? If you’re the business owner, then either way, that person is going to be you. But if you are an employee, it could make a big difference.

Article contents:

What does personal contract hire (PCH) mean?

PCH vs. BCH - when you are an employee

How does business leasing work if you're both driver and owner?

Car leasing for business owners

Financing business leased cars

What about personal contract hire deals?

What is best for insurance purposes?

Get the perfect deal for you

What does personal contract hire mean?

Under personal contract hire (PCH), the vehicle is under your control. You are the registered keeper - you make the monthly payments and any issues are yours to deal with.

It’s personal – nothing to do with a business. A non-work-related car.

Under business contract hire (BCH), the vehicle is registered with the business and someone there (it still could be you!) deals with the administration.

The big differences depend on how you stand in the business.

PCH vs. BCH – when you are an employee

It’s great to get your company to pay for a vehicle for you. There’s a little bit of a hit to your salary as you deal with Benefit-in-Kind (BiK), but a lot of the worry is lost, especially in a company that’s large enough to have its own administrative staff.

Flat tyre? Call the office and get someone to sort it. Need a service? Drive into work and have it sorted while you’re busy typing away. Accidentally scratch the side of someone’s Jaguar in a busy London car park? It’s another call to your ever-helpful company administrator.

Of course, all these perks from a business contract hire agreement do come with a serious downside – if you plan to leave your job (or through certain circumstances, you get that choice taken from you) then you are saying goodbye to your car and your income on the same day. It can happen.

Getting your car personally, however, puts you back in the control seat. Sure, you have to manage the payments, organise your own insurance and breakdown cover and regularly have the car serviced, but no one is taking it away from you – not unless you fail to keep up the payments on the contract.

How does business car leasing work when you are both the driver and business owner?

Like many things, car leasing is subject to VAT. If you have a VAT-registered business, then you will be able to claim back 50% of this cost and save yourself hundreds of pounds in the process. A typical lease over three years runs up over £1,500 in VAT alone so shaving that in half is a great thing!

Plus, there’s no reason you can’t enjoy the benefit of your own administration team too, should you want it.

Ultimately however, as the business owner, the responsibility of the car lease is going to be yours whether you take out a business lease or a personal one – and if your company is small or new, the leasing company is going to want to delve into your personal finances to ensure your credit history is good – just the same as with a personal contract hire agreement, so there’s little difference there.

Car leasing for business owners – how does it work?

Car leasing is the best answer for wanting a new car in the UK today. Through business leasing deals, you can get vehicles for you and your employees that properly represent you to your clients. No more will you worry that a client will think badly about your business or believe you are not worth working with because you have turned up in a fifteen-year-old hatchback – drive the car that projects the right image and potential clients will see that you have what it takes.

The same is true for your employees – do you really want to trust the reputation of your business on your staff’s personal vehicle choices? By leasing a fleet of up-to-date cars that really shines, you will be able to rest, knowing that the right impression is always given, no matter who you send.

At Complete Leasing, we can help you lease a car through your limited company. We have a vast network of partners across the UK and can bring you the finest business car lease contracts whether you are looking for nippy smaller vehicles for your sales force or a luxury executive vehicle for yourself.

Plus, we have a full range of options that include electric vehicles, hybrids and more – including a staggering array of vans. Whatever your business needs, we can cover it.

Financing business leased cars

One of the huge advantages of business contract hire is the lack of capital needed to be driving a top-end car right away. When leasing a car, you often see the few numbers as part of the contract description: 3 + 23, or 6 + 35, for example. These tell you the contract payment terms – the first number is the deposit amount in terms of number-of-months, the second is the number of subsequent months the lease will run for. 3 + 23, therefore, means a deposit equal to three monthly payments, followed by a payment every month for 23 months thereafter (totalling two years). For a car that’s £200 per month, that would be £600 upfront, with 23 further payments of £200 per month to be made as per the contract terms.

£600 upfront and that’s it?!

When you are trying to build your business, knowing how best to use your capital is key. Piling vast amounts of money into buying cars can drive your company to an early grave, but with business contract hire, you can pay as little as £600 in the first instalment and immediately reap the advantages of a brand-new lease.

Even a relatively expensive lease, say 6 + 35 terms on a £300/month vehicle is only going to require an initial outlay of £1,800 – tens of thousands cheaper than buying, and much more satisfying. After all, you know that in a few years, you will be able to effortlessly upgrade to a new vehicle without worrying and selling or part-exchanging the old one.

And remember - that contract hire is tax deductible!

What about personal contract hire deals?

Of course, most people don’t have the luxury of owning their own business – are they left out in the cold with no good options? Not at all!

When looking to lease a car for personal use, you want the ultimate in value-for-money. With car depreciation averaging 20% per year, buying a car for £30,000 and then watching it plummet in resale value by £500 every month is soul destroying – but that’s what’s happening.

It’s all too easy to forget the depreciation and focus on the monthly cost of the lease against a monthly payment on a hire purchase or personal contract purchase (PCP) option, but the maths never quite work in favour of buying – and why would they? With a personal contract hire lease, you might never technically own the car, but you get all the experience of doing so without any of the downside.

£500 per month in depreciation? It’s easy to see that a personal contract hire is better than that, as long as it’s cheaper than £500 a month! And almost all of them are.

Whether you are looking for a larger family car to fit all the kids in, or a sporty number for you and your partner to enjoy on weekend breaks to the continent, we have the car for you here at Complete Leasing. Why not take a look at the range and give us a call when you see something that leaps out at you!?

BCH or PCH – which is best for insurance purposes?

It is not the leasing company’s responsibility to organise your insurance or breakdown cover (although many lease deals do come with a small level of breakdown cover anyway). Make sure that you put fully comprehensive car insurance in place before driving away in your leased car, no matter if it is a business lease or a personal one.

Remember, if you are a business owner providing cars for your employees to use, you will probably want to make sure they are adequately covered. Driving for business requires a higher level of insurance cover than basic personal use, and it’s important that you get that for all your business cars.

This is especially true if your vehicle forms part of your business plan – for example if you are a taxi or courier. Talk to your insurance company regarding your exact usage for your vehicle and make sure you get the right level of cover. High mileage should also be factored into your insurance.

For personal contract hire, there’s no difference between the insurance you get with a leased car to that you would take out if you had bought the car. Again, make sure it is fully comprehensive and covers you for your exact use. Personal and social use insurance is the cheapest, but make sure it includes commuting cover if you intend to drive your car daily to the office – and never use your car for company use if you don’t have the right insurance put in place in advance. Even popping to the shops to buy the office some stationery can count as a business use and a crash during working hours on such an errand can find you stunned and without insurance!

Getting the perfect deal with Complete Leasing

Whether you are looking for a car as part of your business, for your employees or simple as a personal drive completely independent to your work, we have the right vehicle for you.

At Complete Leasing, we specialise in getting our customers the very best deals available in the UK, with experts in dealing with poor credit rating or businesses yet to build up a credit score, and with knowledge across the board from van leasing through to multiple car fleet leasing.

Give us a call today to get started on the road that leads to a brand-new car or fill in our contact form to have someone get back to you at a convenient time.

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Complete Leasing will find the best deal for you – get in touch with us today!


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