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Personal Contract Hire

Personal Contract Hire

Personal contract hire is also known as ‘leasing’.
It’s a method of financing vehicles for private individuals that involves taking a fixed term contract with a chosen mileage limit and having a fixed monthly payment calculated accordingly.
Typically contracts range from 2-5 years in duration and once the contract is over you simply return the car back to the finance company without having to pay any kind of settlement figures.
Under a personal contract hire agreement you will not own the car.
It’s effectively a long-term rental contract in which you pay the depreciation of the car without having to worry about what the car is worth afterwards (‘residual value’.
The finance company takes on the risk of the residual value of the vehicle so regardless of crashes in the used car market, you don’t have to worry about being out of pocket.

Contract Hire

Contract Hire

Contract hire is also known as ‘leasing’.
It’s a method of financing vehicles that involves taking a fixed term contract with a chosen mileage limit and having a fixed monthly payment calculated accordingly.
Typically contracts range from 2-5 years in duration and once the contract is over you simply return the car back to the finance company without having to pay any kind of settlement figures.
Under a contract hire agreement you will not own the car.
It’s effectively a long-term rental contract in which you pay the depreciation of the car without having to worry about what the car is worth afterwards (‘residual value’.
The finance company takes on the risk of the residual value of the vehicle so regardless of crashes in the used car market, you don’t have to worry about being out of pocket.

Finance Lease

Finance Lease

A finance lease is an alternative method of financing vehicle either where contract hire is not suitable, where companies want to minimise the risk of charges at the end of the contract, when companies want the vehicle to appear on their balance sheet, or where the tax advantages of finance lease suit the business better than other methods.
Under a finance lease agreement you effectively rent the vehicle for a fixed contract duration with a fixed monthly payment, and a balloon at the end of the contract.
At the end of the contract businesses can either sell the vehicle to a third party and retain most of the profits (if the vehicle is sold for more than the balloon payment), or can pay it and operate under a ‘peppercorn agreement’.
Businesses can opt to have a higher balloon payment and lower monthly payments or can choose to finance the entire cost of the vehicle with higher monthly payments and have a minimal balloon payment at the end of the contract.