Finance Explained

The simplicity of contract hire has made it the most popular method of vehicle acquisition for a company concerned with efficient use of time and money. Basically choose the number of vehicles you require then lease them for an agreed period of time at a fixed monthly cost. Maintenance and added value services can be added.

The benefits to you:

• With Contract Hire, you can drive a new vehicle for a small upfront payment (typically the equivalent of three months’ repayments) and significantly less each month than you would need to spend on a car bought with a loan.
• With Contract Hire, you are also exposed to less financial risk, as the lease contract you sign is for the monthly payment across a lease contract term rather than the cost of the entire car.
• There is a smaller deposit payment required than for a Hire purchase or Loan agreement. Normally, this is equivalent to three month’s payments.
• With Contract Hire, you don’t need to arrange or negotiate the sale of your old car when you want a new one.
• You can select the exact trim and colour online for any new car – unlike when you buy a used car from a dealership.
• Contract Hire is also cheaper than ownership over the long term if you intend to drive new cars and replace them every few years.
• You have the option of including all maintenance and services in the monthly price.
• The road fund licence will always be included for the first year of the lease contact and often over the whole life of the contract. The finance company will send you the tax disc for the windscreen each year.
• It may be possible to reduce the Benefit In Kind (BIK) tax implications of a company car through paying for a Contract Hire through a car allowance.

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This option allows you to defer a fixed amount of the vehicle’s value to the end of the agreement. The lower monthly rental is determined by the initial cost of the vehicle, the period of the finance lease, the residual value, and the final payment (not necessarily the vehicle’s residual value).

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If you want to buy a vehicle outright, but don’t have the money to do so immediately then lease purchase could provide an affordable solution. You choose an amount of initial deposit to pay then defer part of the balance to the end of the agreement. Over the lease period you pay a fixed monthly amount. You then make final cash payment and the vehicle becomes yours.

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