Personal v Business Vehicle Leasing: What's the Difference?
13th Dec 2022
By Edward Cook
Finding the right leasing option
Understanding the difference between Personal Contract Hire (PCH) and Business Contract Hire (BCH) can be difficult, especially if you aren't sure which one is suitable for you.
There are a range of different factors to consider, including which vehicle you'd like to lease, who will be applying for finance, and how long you'd like the lease to run. However, determining the best option will predominately come down to whether the vehicle will be used for business use or not.
- What is Personal Contract Hire (PCH)?
- What is Business Contract Hire (BCH)?
- What are the benefits of each?
- What documents will I need to apply?
- Personal and Business leasing compared
What is Personal Contract Hire (PCH)?
Personal Contact Hire (PCH) is a form of vehicle hire agreement for private users that have no intention of owning the vehicle at the end of the lease period.
When the agreement is set up, you will agree an initial payment and an annual mileage allowance, which will determine how much your monthly payments will be. There's also opportunities to include additional extras as part of the monthly payment, such as maintenance packages.
When your agreement is coming to an end, you simply return the car and there will be no additional costs as long as the vehicle is in good condition and agreed mileage allowances haven't been exceeded. This allows you to find a new PCH deal without the stress of having to sell your car.
Vehicles that are part of a PCH deal cannot be used for business purposes, and it's worth bearing in mind that you're responsible for insuring and maintaining the vehicle.
What is Business Contract Hire (BCH)?
If you're looking to apply for finance on a vehicle that would be involved in business use, or if you're applying for finance as a VAT registered, limited company, partnership, sole trader or LLP, then Business Contract Hire (BCH) could be the best option for you.
It works in a similar manner to a PCH deal, which means a mileage allowance and initial payment will be agreed, with a set amount of monthly payments dependant upon the agreement term. You can also integrate costs such as road tax and maintenance plans into the monthly payments, making business budgeting much easier.
Vehicles that are part of a BCH deal can be used for business purposes, and you're also responsible for maintaining and insuring the car. When it's time to hand the car back, you can do so with no additional costs, as long as the car is in good condition and within agreed mileage allowances.
What are the benefits of each?
Each type of leasing is suitable for differing purposes and offers a range of benefits that allow you to get the most out of your lease vehicle. The advantages include:
Personal Leasing (PCH)
- Fixed monthly rentals
- Road tax included
- Maintenance options are available
- No depreciation to worry about
- No disposal issues
- Flexible terms
Business Leasing (BCH)
- Up to 100 percent of VAT can be reclaimed, dependent on use
- Monthly payments spread over an agreed period of time, negating the need for a large sum of money as an outright payment
- Maintenance and road tax payment plans can be integrated into monthly costs
- No worry about resale or depreciation
- Flexible terms
What documents will I need to apply?
In order to apply for a lease agreement, you'll need to gather a variety of documents.
To apply for a Personal Contract Hire agreement, you need:
- Full name (and previous name if applicable)
- Date of birth
- Marital status
- Residential status
- Address history for the past three years
- Bank details
- Proof of identity (e.g. a valid UK passport)
- Proof of current address (e.g. a utility bill dated in the past three months with full name and current address on it)
- Valid, full UK driving licence
To apply for a Business Contract Hire agreement, you need:
- Company details (including name, address, company reg. number, and annual turnover)
- Director details (including name, date of birth and marital status)
- Business bank details (including bank name, account number and sort code)
- Three months' recent bank statements (if the business has been trading for less than two years or for high value vehicles)
- VAT returns or utility bills (if the business has been trading for less than two years)
- Company accounts (if the business has been trading for less than two years)
- Copy of Director's driving licence or company accountant's details (for high value vehicles)
Personal and Business leasing compared
To summarise, the main difference between the two leasing types is their intended purposes. PCH is only to be used for personal use, such as the school run, trips to the shops, or road trips. Vehicles on a PCH agreement can also be used to complete the daily commute to and from your place of work.
BCH lease deals on the other hand are intended to be used by businesses for business activities. This can include deliveries, trips to various locations carrying equipment, or used by your workforce to get around during their working day. They can also double up as a personal vehicle, but this will impact how much VAT the business is able to reclaim.
If you're found to be using a PCH vehicle for business purposes, you may face penalty charges, as business use is not taken into account as part of your monthly payment like it is on a BCH agreement. Both lease types are normally only available on new vehicles, but there may be some providers that offer them on used vehicles too.
Discover your next lease deal with Evans Halshaw
PCH and BCH are very similar in the fact that a vehicle can be leased for a set period of time, at a fixed monthly cost and with a mileage limit. At the end of the contract, the vehicle is returned. However, the noticeable difference between personal and business leasing is that as a business leaser, you can claim back the VAT.
We offer a range of personal and business lease deals on plenty of our new cars. If you're interested in leasing a vehicle and would like more information or to test drive a specific model, please contact your nearest Evans Halshaw dealership.
Alternatively, our blog section is home to a range of leasing articles to provide further advice.
