What’s the difference between PCP and PCH?

Approximately 20% to 30% of new cars in the UK are acquired through leasing, and it’s easy to see why. Car leasing offers a flexible, budget-friendly way to get behind the wheel of the latest models. But sometimes the word lease can get a little confusing. Leasing covers a range of things, such as:

• Salary sacrifice
• Business contract hire (BCH)
• Personal contract purchase (PCP)
• Personal contract hire (PCH)

And as much as we’d love to chat you through what leasing is, we’ve already done that over in our guide to leasing (which you should definitely check out).

What we want to focus on, is two common types of leasing that often get mixed up (and are probably the reason you clicked on this blog in the first place) - PCP and PCH. They sound similar, but they work very differently, and understanding the difference can help you figure out which option fits your lifestyle and budget.

What we’re covering:

• What exactly are PCP and PCH?
• Pros and cons of PCP
• Pros and cons of PCH
• Key differences between PCP and PCH
• Tips for choosing the right option for you

Let’s dive in.

They sound so similar, and they’re both leasing options, but what do they actually involve?

Think of PCP like a finance agreement with flexibility built in. You pay fixed monthly instalments over an agreed period, typically between two to four years. The key difference from a standard loan? You’re not paying off the full cost of the car - just a portion of it, which keeps the monthly payments lower.

At the end of the agreement, you usually have three options:

1. Buy the car – If you’ve fallen in love with it, you can make a final "balloon payment" (also known as the Guaranteed Future Value or GFV) to own it outright.
2. Hand it back – If you’re ready for something new or don’t want to keep it, you can simply return it with no further payments (as long as it's within the agreed mileage and in good condition).
3. Trade it in – If the car is worth more than the balloon payment, you can use any equity towards a new PCP deal (basically, if the car is still worth some money, you can get that value taken off a new car lease)

PCP is a great option if you like driving newer cars with lower monthly payments but still want the flexibility to own the car at the end if it suits you.

PCH is much more like a long-term rental. You pay an initial rental fee (usually equivalent to a few months’ payments) followed by fixed monthly payments for the duration of the contract (typically two to four years). When the contract ends, you simply return the car - no option to buy, no hassle.

With PCH, you don’t need to worry about depreciation or resale value. Some leasing providers (like ourselves with Intelligent EV) even include maintenance packages, making budgeting easier. However, there are some key things to keep in mind:

• Mileage limits – You agree to a set mileage allowance upfront. Going over the agreed mileage could mean additional charges.
• Condition requirements – The car must be returned in good condition, or you might face end-of-contract charges.

PCH is ideal if you want a hassle-free way to drive a new car every few years without the responsibility of ownership. It’s simple, predictable, and great for those who like to swap cars regularly.

So, now you know what the two are, what are the pros and cons of both options?

PCP is one of the most popular ways to finance a car, and it’s easy to see why. It offers flexibility, lower monthly payments, and the option to own the car at the end. But is it the right choice for you?

• Lower monthly payments – Since you're only paying off part of the car's value (not the full price), monthly payments tend to be lower than with a traditional finance loan.
• Flexible end-of-contract options – Want to keep the car? You can buy it. Fancy something new? Trade it in. Changed your mind? Just hand it back. PCP gives you choices.
• Newer cars, more often – If you like the idea of upgrading to a new car every few years without the hassle of selling your old one, PCP makes that easy.

• Mileage limits – Exceeding your agreed mileage can result in extra charges when you return the car.
• Wear and tear charges – If the car is returned with more than fair wear and tear, you may have to pay for repairs.
• Could be more expensive than other leasing options – If you plan to hand the car back at the end of the contract, a PCH lease could work out cheaper overall.

Next up: the pros and cons of PCH.

• Lower, predictable payments: PCH typically offers lower monthly costs than PCP, making it ideal for budget-conscious drivers.
• No depreciation worries: Since you don’t own the car, its value doesn’t affect you.
• Hassle-free maintenance: Many PCH deals include maintenance packages, so you can say goodbye to repair worries.
• Seamless upgrades: Return the car and upgrade to a new one at the end of the lease - no need to deal with selling.

• No ownership option: Unlike PCP, you can’t buy the car at the end.
• Mileage limits: Exceed the agreed mileage, and you could face extra charges.
• Customisation restrictions: Since the car isn’t yours, modifications are typically off the table.

PCP is great if you like having options and prefer lower monthly payments. But if you're after a simple, hassle-free leasing experience with no option to buy, PCH might be a better fit.

Here’s a quick side-by-side comparison, including our very own Intelligent EV option, to help you weigh up your options:

With Intelligent EV you’ll get:

• The latest EVS - new electric cars with the latest tech
• Pay to drive, not own - lower your costs by paying monthly, without any worries of ownership
• Smart home charging - automatically charge at times when energy is cheapest and greenest with exclusive discount on Octopus Energy’s Intelligent Octopus Go tariff
• Smart public charging - pay in the app, or with just a tap, and get 8% off all public charging with Octopus Electroverse
• Servicing and maintenance included - we’ll keep your car in tip-top condition with servicing, maintenance, and repairs included
• VIP customer service - we’ll look after you with our renowned Octopus customer service
• Perks like £500 off solar panels for your home

Both PCP and PCH let you drive a brand-new (or used) car with lower monthly payments than traditional car finance, but they suit different needs. The right choice depends on how you plan to use the car and what you want at the end of the agreement.

• Want the option to own the car at the end by making the final balloon payment.
• Like having flexibility - you can buy, trade in, or return the car.
• Prefer lower upfront costs compared to traditional car finance.
• Might want to upgrade but also like the idea of having equity in your vehicle.

• Want predictable, low monthly payments with no unexpected costs.
• Love upgrading to a new car every few years without worrying about resale value.
• Prefer a hassle-free experience - just hand the car back at the end of the contract.
• Like the idea of optional maintenance packages to keep things simple.

If you see a car as something you might want to own, PCP gives you that choice. If you’d rather treat it like a subscription - enjoy it for a few years, then swap - PCH is probably the better fit.

Both PCP and PCH offer flexible ways to drive a new car without the hefty upfront cost of buying outright. But if you're looking for a hassle-free way to enjoy an electric car with fixed monthly payments and zero worries about resale value, PCH is the way to go.

Now, enter Intelligent EV (our supercharged version of PCH). It’s more than a lease and way more than just a car on your driveway. Intelligent EV wraps your car, home energy, and public charging into one smart bundle, making EV life cheaper, greener, and gloriously fuss-free. No surprises, no faff - just an easier, smarter way to drive electric.