What Is Car Leasing and Contract Hire?
Car leasing and car contract hire is simply a new car contract that allows the user either business fleet or private to have the use of any motor vehicle they wish to drive for an agreed time period (i.e 2 or 3years) at a set mileage predetimeined at the start of the car lease agreement. At the end of the contract period general the vehicle is returned to the finance provider just like returning a rental car.
What is the Benefits for Most Car Leasing and Contract Hire Customers?
The major benefit to car leasing and car contract hire is the ease in which you are able to budget and include a full service packcash flow
Car Leasing versus hire purchase car loans
H.P enables you to buy and own your car. Whereas, car leasing is effectively is car rental agreement. Once you have made all the payments on an HP instalment loan, you will own your car outright; whereas, when all the payments are made on a car lease agreement, you own nothing, you only pay for what you use.
Before you take out a car leasing agreement, we suggest you consider what changes may happen during the life of the car leasing agreement. Are you looking at a car lease agreement because you have been offered a cash alternative from your employer, or are you considering the alternative way of using are car by taking out a car leasing agreement because it may be cheaper?
Consider what the payment would be if you decided to hire purchase a new vehicle instead taking out a car lease offer. You'll quickly see how changes in the finance rate APR, purchase price, term, and deposit can effect your loan payments. These factors will also affect your car leasing payments as well.
Who should you lease?
Car leasing began as an economical way to provide company vehicles for business and there employees, a benefit in kind from your employer rather than an increase in salary. Today car leasing is available to private individuals and ex-company car drivers under personal car leasing schemes such as; personal contract hire and personal contract purchase. This enables any driver to drive a car they may not be able to can afford if they had to paying cash or make repayment on a hire purchase agreement.
Significant portions of the new company cars are leased. If you are a small business owner, or use your vehicle exclusively for business use, car leasing may be a great idea. As a rule, the cycle of a car leasing agreement would span about 3 years, but more recently has become available from 12 months to 60 months leaving you to choose the best possible deal and the ability to change your car or van more often than you would imagine.
Car leasing appeals to both personal and business users, one that offers a lower initial payment and lower monthly payments. You want or need to drive something that reflects your status, or vehicle that is fit for the job but it is often one you are unable to afford. This is where car leasing can offer a real choice. Unlike HP or traditional ownership leased vehicle is owned by the finance company (provider), yet you are responsible for maintenance, repairs and insurance unless this is included with your car leasing agreement. Car leasing does limit you to a fixed number of miles you can drive, if you exceed this you will be charge for the excess mileage over your agreement total mileage as set in you car leasing contract.
Potential hidden costs
Your car leasing contract will outline the condition the vehicle must be in. Dings and scratches must be professionally repaired, broken cup-holders must be replaced, and cigarette burn-holes must be eliminated or will be charged for repairs or replacements. Most car leasing company today use the guideline agreement with the industry body called BVRLA (British Vehicle Rental and Leasing Association) ask for a copy. The return terms and conditions a based on fair wear and tear, what would you reasonability expect the condition of a vehicle be after 3 years, 60,000 miles or more. Treat you lease car they same as if you owned it and you will not go far wrong.
A Car Lease Agreement Is A Contract
A contract in which monthly payments are made to a leasing provider arranged by Leasesave Vehicle Leasing Limited (your agent) in exchange for the use of the vehicle for a predetermined period (12, 18, 24, 36, 48 or 60 months) amount of time. Unlike H.P financing, where the payments are based on the entire cost of the vehicle, car leasing payments are calculated to cover only the estimated amount of depreciation, plus a fact for interest for the term of the contract lease agreement. You're only paying for the depreciation factor portion of the cars original value, not the entire acquisition or selling price. It's comparable to renting an apartment instead of owning a house.
Car Leasing Early Termination
Salespeople may tell you it's easy to end the lease before your contract expires, but don't believe them. A leasing contract is fixed and may be expensive to terminate early. Usually most provider quote approx. a calculation of 50% of the outstanding payments, providing no less than 6 months remain on the car lease agreement. Personal contract purchase agreement offer slightly better option whereas you are able to sell the vehicle and pay of the settlement figure given at the point of wanting to early terminate. Whereas, with a Personal contract hire this option is not available, because your agreement is a hire agreement and doe’s not offer the same benefits, albeit the provider may offer you the vehicle to buy at their price.
Vehicle Residual Value
Residual value is the largest contributing factor to the cost of a car leasing deal. Residual value is the amount the vehicle should be worth at the end of the lease agreement. Depreciation is the difference between the acquisition price and the start of the contract and the value of the estimated sale price of the vehicle at the end of the lease contract, this is set by the leasing company, usual expressed as a percentage of Manufacturer's Recommended Retail Price (MRP). If a the market likes a particular vehicle it will hold it’s value with a higher than average residual value. Cars with lower perceived values have low residual values. Lease companies use future residual guides to determine the value of vehicles. Before you lease a car, check out the best residual values of the cars you're considering. Usually depreciation eats up 20-30% of a vehicle's value during the first year, and another 15% during the second. In general most vehicle have a residual value of 28% - 40% value at 3yrs, 60,000miles, however, lower depreciation gives a higher residual value, which means a lower monthly payment for you.