Car Contract Hire And Leasing

By Author: Doug Percy
Total Articles: 3
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Next time you need to change your car, the fastest growing funding method you should consider is contract hire or ’leasing’, to use the generic term.

Historically in the UK, private purchases of vehicles have been funded with bank loans or personal savings. A growing number of people, however, now seem to have discovered leasing. There are many reasons why people are switching over to cheap car leasing. Among them are preserving other valuable credit lines, reducing your monthly outlay by only paying for the depreciation, having fixed cost motoring over the term, and the convenience of not having to deal with car salesmen at the beginning or selling your old car at the end.

When you apply for a personal loan on a vehicle the banks will credit score you for what will add up the total cost of the car. When you are credit scored for contract hire, however, the amount of credit is simply the total of the monthly payments, which add up to less than the cost of the car because the residual value or balloon payment is not considered. Today banks will only ...
... lend to a certain limit and those credit lines with your own bank should be preserved for large purchases other than vehicles such as conservatories, holidays and weddings.

Contract hire was originally designed to improve a company’s cashflow, but it is equally helpful for personal contracts. Because only the depreciation of the car is repaid, the car being handed back to the funder at the end of the contract, the monthly payment is considerably less. When you take out a personal loan to pay for a car outright, by the time you come to change the car you will usually own the car outright. The money paid to finance this residual value could have been used elsewhere, even in a more rewarding savings scheme if the money was spare!

Many people like to know that all the risks of fluctuating payments and values are taken away with Contract Hire. The payments are fixed for the term and will only change by the amount of any change in VAT or Road Fund Licence. The risk of falling car values is only the concern of the funder.

For some people though, the main reason of using Contract Hire is that is so hassle free! Most people will order their car over the internet and never have to set foot in a car dealership to haggle with the salesman. At the end of the contract there are no ‘tyre kickers’ knocking at your door wanting to make you an offer for your old car. The funder delivers your new car to your door and will collect at the end of the contract. And finally, all main funders adhere to an industry standard fair wear and tear policy, which means no unreasonable end of contract charges should be made. Good luck for your next best car leasing deals.