What is the difference between contract hire and personal contract hire?
Contract hire and personal contract hire are the same type of agreement: you pay a fixed monthly rental to use a vehicle for an agreed term, then hand it back. The difference is who it is for. Contract hire is for businesses. Personal contract hire is for private individuals.
The detail
Who the customer is. Business contract hire is taken out by a limited company, partnership, sole trader or other business. Personal contract hire is taken out by an individual for private use.
Tax and VAT. A business may be able to reclaim some or all of the VAT on its rentals, depending on its VAT registration and how the vehicle is used. Cars with any private use are treated differently from vans used for work. A private individual cannot reclaim VAT. Ask your accountant about your own position.
Checks. A business is usually assessed on its trading history, accounts and sometimes the directors' or owners' details. A personal applicant is assessed on their own credit file and affordability. Neither outcome can be assumed in advance.
What stays the same. In both cases you don't own the vehicle, there is an agreed mileage allowance, and you are usually responsible for returning it in fair condition. Maintenance is optional and may be added in some cases. Excess mileage and damage charges can apply at the end.
What we handle. Swiss Vans Ltd (FCA FRN 668283) is a credit broker, not a lender. contracthire.tv deals with business contract hire for cars and vans, and finance is provided by a lender from our panel, subject to status.
A worked example with no invented figures
Take two people who each want the same model of car on the same term and mileage.
The first runs a limited company and needs the car for client visits. She applies for business contract hire in the company's name. The company is the hirer, the rental is a business expense, and her accountant decides how much VAT can be reclaimed and how the car is treated for tax.
The second is an employee who wants the car only for commuting and family use. He applies for personal contract hire in his own name. He pays VAT as part of the rental and cannot reclaim it, and the agreement rests on his personal credit and affordability.
The vehicle, the term and the mileage could be identical. The paperwork, the checks, the tax treatment and the person responsible for the agreement are what differ.
Related questions
- Can a sole trader take business contract hire? Often yes, but the lender will assess the business, and sometimes the individual, on its own merits.
- Is business contract hire the same as leasing? In everyday UK usage, contract hire is a form of vehicle leasing. The term "finance lease" is a different arrangement.
- Which is right for a van? Vans used for work usually fall under business contract hire.
Questions people ask
Can I get personal contract hire through contracthire.tv?
No. We broker business contract hire for cars and vans only. If you need a private agreement, you would need to use a provider that offers personal contract hire.
Does business contract hire let me reclaim VAT?
It may, depending on whether your business is VAT registered and how the vehicle is used. Car leasing often has restrictions that vans do not. Speak to your accountant.
Is personal contract hire the same as PCP?
No. Personal contract hire is pure rental, and you never have the option to buy the vehicle at the end. A PCP is a purchase agreement that includes an optional final payment to keep the car.
Are the credit checks different?
Yes. Business applications look at the company or trading business, while personal ones look at the individual. Approval is never certain in either case.