Personal Leasing (Personal Contract Hire)

Personal car leasing is a long-term fixed rental agreement and has become a popular finance product for those individuals who want a new car every 2, 3 or 4 years. This is suitable for those customers seeking to eliminate the financial risk associated with disposing of a vehicle and, if chosen, enjoy the convenience of a full maintenance service (known as funder-maintenance). It also enables individuals to benefit from competitive fleet discounts, which would otherwise be unavailable to them.

Contract hire is an easy way to drive a brand-new car on a “usership” style arrangement; the product is NOT designed for you to own the vehicle at the end of the contract. Some finance companies allow a lease vehicle to be purchased but this is very rare. Do note that the price you pay to own the vehicle will be calculated on the market valuation at that time and doesn’t take into account any rentals you may have paid. For individuals looking to buy a car, contract hire is not something which they should consider – a Personal Contract Purchase or Hire Purchase should be selected.

So what will a lease cost me? To calculate the price per month you need to supply the following information:

  • The exact vehicle you want (plus additional specification) – note that leasing is available for new, or nearly-new, cars only;
  • The contract length – you can choose between two, three or four years (five years is sometimes available but rarely chosen);
  • The annual mileage – you can elect to have a contract which offers anywhere between 5,000 to 50,000 per annum. Choose an annual mileage which actually reflects your driving behaviours (don’t select less to save money). With electric vehicles, you will be asked to consider the vehicle’s battery range and capabilities. Additionally, certain finance companies set maximum mileages for electric vehicles;
  • The initial rental – this is the amount you pay in month one. While customers can refer to this as the initial payment or deposit, the leasing industry will use the term “rental”, as this demonstrates it is not a purchase-style product. You can generally adjust this amount to as much or as little as required. The total amount payable remains the same. Just make it clear if you want a no-initial rental (the “no-deposit” scheme) or high initial rental (“big deposit” scheme).

Key Considerations:

  • Contract hire is a credit-based agreement – you must go through a formal credit check process which will review both your willingness to pay and your ability to pay. If you have poor/adverse credit then leasing is unsuitable for you. Consider checking your credit with Experian (or similar) to help you understand your credit position;
  • Contract hire is a fixed term agreement – some customers confuse the different finance products. With contract hire you cannot hand the vehicle back at any time. If the car is no longer suitable you need to enter into a process called Early Termination and this will result in you paying to return the vehicle; and
  • Excess mileage – setting your mileage accurately is important. If you exceed the maximum mileage allowance, there is a pre-set charge which you pay after returning the vehicle for any mileage above the allowance.

 Advantages of Personal Contract Hire

  • Fixed period of car usership – you organise a contract around your requirements. Some customers enjoy changing their cars regularly (and within the warranty period) so leasing provides for this. Also, electric cars are new to many customers and with products developing so expediently, a shorter 2-year contract is a preferable route;
  • Low initial rental options available (subject to your credit) – you don’t have to pay any “big deposits”. For company car allowance drivers or those looking to keep their cash in the bank, the no initial rental (no deposit) option is ideal;
  • Ability to include a maintenance package – this will include the cost of all routine servicing, maintenance and tyres (and sometime breakdown recovery). While each finance company will have different terms and conditions, the end result is certainty of cost. You just have to fuel and insure the car;
  • No depreciation concerns – for those customers who do not want the risk of vehicle ownership, leasing provides far more certainty. If the vehicle depreciates quicker than anticipated, this is something the finance company has to manage. If you are nervous about the future values of electric cars, leasing protects you from this risk.

Disadvantages of Personal Contract Hire

  • You will be charged for any damage that is not acceptable under the British Vehicle Rental and Leasing Association’s (BVRLA’s) Fair Wear and Tear Guidelines. This is available from Car-E-Lease UK upon request;
  • Leasing is not flexible – unlike some purchase products which allow you to return them at any time, contact hire is a fixed term agreement. This does not operate like a Personal Contract Purchase which can allow you to voluntary terminate the vehicle;
  • You will be charged an excess mileage rate for any mileage above your contracted rate (set at a pre-agreed pence per mile). This is why you must set your annual mileage at a realistic figure; and
  • There is generally no option to purchase the car at the end of the contract – if you are looking to buy your electric car, you need to consider other products. With electric cars holding value and popularity, the potential benefit will be retained by the finance company.

View leasing deals for electric cars