The Details about Car Leasing and Contract Hire Financing

Considering the popularity of contract hire and leasing in UK, most people are choosing this arrangement over buying a car.

About Personal Contract Hire

Personal contract hire is a cost efficient and convenient alternative to buying a car. Here, fixed monthly installments are paid every month for the lease period. It is therefore, light on the pocket and an easy solution to drive a new car every two to three years. So, if you are passionate about driving new cars every few years without drying up your bank account; car leasing and personal contract hire is right for you.

Yet another misconception about contract hire and leasing is that it is meant only for business use. However, this is not true. Contract Hire is also available for personal use cars. Thanks to the many benefits of contract hire, it is highly preferred for both personal and business use.

Personal Contract Hire Financing

Personal Contract Hire deal is like a personal loan given by car leasing or financing companies to use a car. However, as the car is not being bought, the loan amount is not equivalent to the total value of the car, but is a partial amount payable towards the use of the car and not its purchase price. This financial arrangement is often complex to understand.

Here are some details about the same.

Personal contract hire finance consists of three parts. They are:

• The primary part of the finance deal is the down payment or initial deposit. Mostly, this is taken to the extent of ten percent of the car’s price. It can be lower; depending on the leasing and financing company. However, the bigger the down payment, the lower the monthly installments.
• While buying a car, the total value of the car is equivalent to the market price determined by the manufacturer. However, there is no fixed value for contract hire and leasing. However, the amount of personal loan is usually equivalent to the value of the car lost in the lease period; as perceived by the finance company. It is therefore; fair to pay towards the amount of car used, i.e. the value of depreciation over the lease period.
• The finance deal also consists of a balloon payment, which is payable only if the car is to be bought and not returned. This amount is equivalent to the value of the car as perceived by the financing company at the end of the lease period. This amount is mostly determined while drafting the lease agreement itself. So, if the car is to be owned even at the end of the lease period, the financing company allows for the same.

So, personal contract hire allows you to either retain the car by making the balloon payment or return it at the end of the lease period without worrying about the depreciation and car disposal.

The author Brad Carlton has a vast knowledge based on car lease deal and has already written informative articles based on personal car lease,business car leasing related topics.