Personal Contract Hire vs Personal Contract Purchase in 2026 (UK Driver Guide)

Personal Contract Hire (PCH) and Personal Contract Purchase (PCP) look almost identical on a finance comparison ad. They have similar monthly payments, similar terms, often the same showroom presentation. But following the FCA disclosure changes that took full effect in 2025, the two products are no longer interchangeable. Picking the wrong one in 2026 can cost you GBP 4,000 to GBP 9,000 across a typical three-year term.

PCH (lease): You rent the car for a fixed term, return it at the end. You never own the vehicle. Monthly payments cover depreciation plus profit margin. There is no balloon, no option to buy.

PCP: You finance the car with three components — small deposit, monthly payments covering part of the depreciation, and a large balloon (Guaranteed Minimum Future Value, GMFV) at the end. At the end you can: pay the balloon to keep the car, hand it back, or part-exchange.

Sample: 2026 Vauxhall Astra GS, on-the-road price GBP 28,500, 36 months, 10,000 miles/year:

• PCH: initial GBP 1,800, 35 monthly payments of GBP 285. Total cost: GBP 11,775.
• PCP: deposit GBP 3,500, 35 monthly payments of GBP 240, balloon GBP 11,200. Total if returned: GBP 11,900. Total if kept: GBP 23,100.

If you definitely return the car, PCH wins by a small margin (GBP 125) and is simpler. If there is any chance you keep it, PCP is cheaper than buying outright at the end thanks to interest already paid on the depreciation.

• You change car every 2 to 4 years and never want a balloon decision.
• You prefer no upfront cash impact (deposits are smaller).
• You do high mileage and want it factored into the rental rather than charged at the end.
• You qualify for business contract hire — VAT recovery is then huge.

• You might keep the car beyond the term.
• You are buying a model with strong residuals (Toyota, Honda, premium German).
• You want the option to part-exchange any time after the 50 percent threshold.
• You expect to make voluntary termination available as a hedge.

1. PCH is always cheaper. False — only if you definitely return the vehicle.
2. PCP lets you walk away easily. Voluntary termination only kicks in once you have paid 50 percent of the total, which is typically at month 22 to 28.
3. You can negotiate the balloon. The GMFV is set by the manufacturer's captive finance and is non-negotiable.
4. Excess mileage is the same on both. PCH excess mileage charges are usually 30 to 50 percent higher than PCP.

In 2026 the choice between PCH and PCP comes down to one question: do you want the optionality to keep the car or not? If yes, take PCP and accept the slightly higher headline. If no — and you are confident — PCH is simpler and slightly cheaper, with the FCA reforms ensuring you actually see the total cost before signing.

Last updated: May 2026. Sample figures use Q1/Q2 2026 dealer quotes and exclude maintenance packages.