Your Absolute Guide to Car Leasing and Contract Hire: The Top Facts You Should Know

Car leasing agreements have been around for a while, but it’s only in recent times that it has really taken off, especially in the UK. It’s a great option if you have a business and you need a fleet of vehicles to operate and run your enterprise, and it’s also brilliant if you are a personal customer and would want to have a new vehicle to drive around without the hefty expense and without worrying about depreciation. At the end of a deal, all you have to do is return the vehicle – it’s as simple as that. But is it really as simple as it seems? Here’s your absolute guide to car leasing and contract hire: the top facts you should know.

• How the agreement or contract works

It’s quite the same as renting a home or flat – it’s an agreement where you can use a vehicle for a set period (usually several years) and you pay a set fee per month for its use. The agreement usually comes with an allotted number of miles per year as well, so you have to make sure that you stick to this limit; otherwise, you are liable to settle extra charges for every mile above the limit. In order to secure a contract hire deal, you may also have to go through a credit check, but the checks for car leasing or contract hire are not as extensive as checks for purchasing a vehicle.

• The facts and details you should know

There are various details and facts you should know when you opt for a contract hire agreement. It’s a cheaper option than purchasing a vehicle for sure, and agreements typically last from two to up to five years. And as mentioned, you may need to go through a credit check, and you may also have to settle three months’ worth of the rental payment up-front. Throughout the entire agreement, you will not be the owner of the vehicle and you have to return it at the end of the term. 

The monthly payment may normally be higher compared to a PCP deal, although you will still generally pay less on a contract hire deal through its entire term. You may also be able to get a vehicle maintenance package along with the deal that can take care of aspects such as servicing or road tax.

• The restrictions on car leasing 

As with other rental contracts or agreements, there are restrictions associated with car or vehicle leasing as well. For instance, you will not be able to change or modify the vehicle (such as adding elements like tow bars) without asking for permission. But you have the option of asking the leasing firm to make changes before you get the vehicle. 

Also, if you go above the agreed miles per year, you will have to settle a fine or fee for the additional miles at the end of the term. In general, the rate is 10 pence for every additional mile. If you think you may exceed the allotted number of miles, it may be cheaper to get a higher agreement on mileage so you can avoid the penalties. 

Once the contract ends, you are responsible for returning the vehicle in good condition and repair, of course considering normal wear and tear.