Are you in the market for a new car but struggling to decide whether to lease or contract hire? It`s important to understand the differences between these two options before making a decision.
Car leasing, also known as personal contract hire, is a form of personal finance where you pay a fixed monthly fee for a fixed period of time (usually between one and four years) to use a car. At the end of the lease, you return the car to the leasing company. It`s important to note that you never actually own the car when you lease, but rather you are essentially renting it for the agreed-upon period.
Contract hire, on the other hand, is a form of business leasing where a company pays a fixed monthly fee for a fixed period of time (usually between two and four years) to use a car. Unlike car leasing, the company has the option to purchase the car at the end of the contract hire period or return it to the leasing company. Contract hire is often used by businesses that want to provide company cars to employees, but don`t want to incur the costs and administrative burden of purchasing and maintaining a fleet of vehicles.
So, what are the key differences between car leasing and contract hire?
Ownership: As mentioned, when you lease a car, you never own it. With contract hire, the company has the option to purchase the car at the end of the contract period.
Monthly payments: Lease payments are typically lower than contract hire payments, as lease payments only cover the depreciation of the car during the lease period. Contract hire payments, on the other hand, cover the cost of the car plus interest and other fees.
Mileage restrictions: Most lease agreements come with mileage restrictions. If you go over the agreed-upon mileage limit, you`ll face additional fees. Contract hire agreements may also have mileage restrictions, but they are often more generous than lease agreements.
End of contract: When your lease agreement ends, you simply return the car to the leasing company. With contract hire, the company has the option to purchase the car, return it to the leasing company, or trade it in for a new vehicle.
In summary, car leasing and contract hire are both forms of leasing, but they differ in terms of ownership, monthly payments, mileage restrictions, and end-of-contract options. When choosing between the two, it`s important to consider your specific needs and budget to determine which option is right for you or your business.
