Terms such as car leasing, Contract Hire, PCH and BCH are often used interchangeably, but they do not all mean the same thing.
The key differences lie in who the contract is for, whether ownership is possible, and how costs and tax are treated.
What is car leasing?
Car leasing is a generic, non-technical term.
It is commonly used by dealers, comparison sites and customers to describe several different types of long-term car finance or rental agreements.
In practice, “car leasing” can refer to:
- Contract Hire
- Personal Contract Purchase (PCP)
- Hire Purchase (HP)
Therefore, the word leasing on its own does not define a specific legal product in the UK.
What is Contract Hire?
Contract Hire is the UK term that most closely matches what is called renting in countries like Spain.
It is a long-term rental agreement where you:
- Pay a fixed monthly fee
- Use the car for an agreed period and mileage
- Return the car at the end of the contract
- Do not own the vehicle
Contract Hire is split into two main categories depending on the customer, Personal Contract Hire (PCH) and Business Contract Hire (BCH).
Personal Contract Hire (PCH)
PCH is Contract Hire for private individuals.
Key features of PCH:
- Fixed monthly payments
- Contract length usually between 24 and 48 months
- Mileage limit agreed upfront
- No option to buy the car at the end
- Maintenance may be included or optional
- Road tax (VED) is normally included
PCH is ideal for drivers who want:
- Predictable costs
- No resale risk
- Regular car changes
- A simple “use and return” solution
Business Contract Hire (BCH)
BCH is Contract Hire for businesses and self-employed users.
Key features of BCH:
- Same structure as PCH
- Available to companies and sole traders
- Potential tax advantages
- VAT can often be reclaimed:
- 50% of VAT on rentals (if mixed use)
- 100% if the vehicle is used solely for business
- Maintenance VAT is usually 100% reclaimable
BCH is widely used for:
- Company cars
- Business fleets
- Salary sacrifice schemes
Are there other car finance or leasing-style options in the UK?
Yes. The most common alternatives are:
Personal Contract Purchase (PCP)
Main features:
- Monthly payments are usually lower
- There is an option to buy at the end by paying a balloon payment
- More similar to financing than renting
- Customer bears depreciation risk if buying
Hire Purchase (HP)
Main features:
- Traditional instalment finance
- You own the car after the final payment
- No mileage limits
- No bundled services
Flexible leasing / short-term hire
Main features:
- Shorter commitments (1–12 months)
- Higher monthly cost
- Popular for temporary needs
What's the difference between hire purchase and personal contract purchase?
Hire Purchase (HP)
This is the best option if you know you want to own the car:
- You’re buying the car in instalments
- Ownership is guaranteed once the last payment is made
- No mileage limits
- Monthly payments are usually higher
- Simple structure: deposit plus fixed monthly payments
- Best if you know you want to own the car.
Personal Contract Purchase (PCP)
This is the best option if you want lower monthly costs and options later:
- You’re financing the car with flexibility at the end
- Lower monthly payments
- Mileage limits apply
- At the end you can:
- Pay the final balloon payment and own the car
- Return the car
- Part-exchange it for a new one
Frequently asked questions
We answer the most common questions about the different vehicle rental models.
Is Contract Hire the same as renting?
Yes. In practical terms, Contract Hire in the UK is equivalent to renting in countries like Spain, Italy or France.
Can you buy the car at the end of a PCH or BCH contract?
No. Standard PCH and BCH contracts do not include a purchase option, although some providers may make an informal offer separately.
Why is the term “car leasing” so confusing in the UK?
Because it is used as a marketing umbrella term that covers both rental-style contracts and finance products.
Is PCH cheaper than PCP?
Monthly payments for PCH can be competitive, but PCP may appear cheaper initially because of the deferred balloon payment.
What happens if you exceed the mileage limit?
You pay a per-mile excess charge, which is stated in the contract.
