1. Fixed Monthly Costs
• Predictable expenses make budgeting easier.
• Usually includes road tax and can include maintenance and servicing.
2. No Depreciation Worries
• You don’t own the vehicle, so you’re not affected by its resale value dropping over time.
3. Improved Cash Flow
• Lower upfront costs compared to buying vehicles outright.
• Capital isn’t tied up in depreciating assets.
4. Access to New Vehicles
• Easier to upgrade to newer, more efficient, and reliable models every few years.
5. Tax Efficiency
• For VAT-registered businesses, up to 100% of VAT on the rental can be reclaimed (if the vehicle is used solely for business).
• Monthly lease payments may be deductible as a business expense.
6. Fleet Management Simplicity
• Ideal for managing multiple vehicles, often with optional maintenance packages included.
7. Off-Balance Sheet Financing
• Because the vehicle isn’t an owned asset, it may not appear on your balance sheet (depending on accounting practices), which can improve financial ratios.
Would you like a comparison between BCH and other leasing or finance options like PCP or HP?
Business contract hire (BCH) is a popular leasing option for companies looking to run vehicles without owning them. But while it offers several benefits (like fixed monthly costs, tax advantages, and no depreciation worries), there are some potential downsides to keep in mind:
1. Mileage Restrictions
• Downside: Contracts come with annual mileage limits. Exceeding those limits leads to hefty excess mileage charges.
• Impact: If your business driving needs are unpredictable, this can become costly.
2. No Ownership
• Downside: You never own the vehicle.
• Impact: There’s no asset on your books at the end of the contract, and you can’t sell or modify it as you’d like.
3. Wear and Tear Charges
• Downside: You’re charged for anything beyond “fair wear and tear” at the end of the contract.
• Impact: Minor dents, scratches, or interior damage could result in extra costs.
4. Contract Rigidity
• Downside: Contracts are hard to change once signed.
• Impact: If your business downsizes or your vehicle needs change, getting out early can be expensive (early termination fees).
5. Long-Term Cost
• Downside: Over several years, leasing can be more expensive than buying outright.
• Impact: Especially for businesses that keep vehicles for a long time, purchasing may offer better long-term value.
6. VAT and Tax Complexity
• Downside: While VAT can be reclaimed (50% on cars, 100% on vans used solely for business), the rules can be complex.
• Impact: Mistakes or misunderstandings around VAT and taxation could cost the business.
If you’re considering BCH, it’s a good idea to weigh it against alternatives like hire purchase or outright purchase, depending on your financial strategy and usage needs. Want help comparing those options?
Top Benefits of PCH (Leasing):
1. Fixed, predictable monthly payments
• Great for budgeting — you know exactly what you’re paying each month.
• Often includes road tax, and some deals even include maintenance.
2. Lower upfront cost
• Usually a low initial rental (e.g. 3–6 months’ worth of payments upfront).
• No big balloon payment at the end like with PCP.
3. No depreciation worries
• The car’s value loss isn’t your problem — you just hand it back at the end.
4. Drive a new car every few years
• Perfect if you like having the latest model with new tech and warranty coverage.
• No hassle of selling or trading in.
5. Simple handback process
• At the end of the lease, you just return the car — no resale stress.
• Start fresh with a new lease or walk away.
6. Option to include maintenance
• Some PCH deals bundle in servicing, repairs, tyres, breakdown cover, etc., for a flat fee.
PCH Is Best For You If:
• You don’t care about owning the car.
• You want a hassle-free, low-commitment driving experience.
• You don’t go over mileage limits and keep the car in good shape.
Want a side-by-side comparison of PCH vs PCP based on your needs?
Personal Contract Hire (PCH), or leasing a car, can be a convenient and low-hassle way to drive a new vehicle, but it does come with some downsides. Here are the main ones:
1. You Never Own the Car
• At the end of the contract, you hand the car back. There’s no option to buy it, unlike Personal Contract Purchase (PCP).
• That means all the money you’ve paid is essentially gone, with no asset retained.
2. Mileage Limits
• PCH deals come with strict annual mileage limits.
• Exceeding these can result in hefty per-mile charges, which can add up quickly if you’re not careful.
3. Wear and Tear Charges
• When you return the car, it has to be in “fair wear and tear” condition.
• Any damage beyond that (scratches, dents, stained interiors) could result in extra fees.
4. Early Termination Costs
• If your circumstances change and you need to end the contract early, it can be very expensive—sometimes up to 50% of the remaining payments.
5. Modifications Not Allowed
• You can’t make permanent changes to the vehicle (like tinting windows or changing alloys) without permission.
• You might also be charged to return the car to its original condition.
6. Long-Term Cost
• Over a long period, leasing can be more expensive than buying, especially if you always need a new car.
• There’s also no trade-in value at the end.
7. You Still Pay for Insurance and Maintenance • You’re still responsible for fully comprehensive insurance, servicing, and MOTs (if the lease goes beyond 3 years), unless these are included in a package.
If you’re considering a PCH deal, it’s best suited for people who want a new car every few years, drive predictable mileage, and don’t want to deal with depreciation or selling a used car. Want help comparing it to PCP or outright purchase?
