Contract hire leasing is one of the most popular ways to finance a vehicle in the UK. In this article, we will explore what contract hire leasing means, how it differs from other forms of vehicle financing, and the advantages and disadvantages of contract hire leasing.
What is contract hire leasing?
Contract hire leasing is a type of vehicle financing that allows an individual or a business to lease a vehicle for a fixed period of time. The leasing company purchases the vehicle and then leases it to the customer for a fixed monthly fee. At the end of the lease period, the customer returns the vehicle to the leasing company, and the leasing company takes responsibility for disposing of the vehicle.
How does contract hire leasing differ from other forms of vehicle financing?
One of the key differences between contract hire leasing and other forms of vehicle financing is that the customer does not take ownership of the vehicle. Instead, they lease the vehicle for a period of time, typically between two and four years, and then return it to the leasing company at the end of the lease period.
Another difference between contract hire leasing and other forms of vehicle financing is that the customer is not responsible for the vehicle`s resale value. This means that the customer can return the vehicle at the end of the lease period without having to worry about the vehicle`s depreciation or resale value.
Advantages of contract hire leasing
One of the key advantages of contract hire leasing is that it allows customers to drive a brand new vehicle without the upfront costs associated with purchasing a vehicle. This can be particularly attractive to businesses that need to provide their employees with reliable vehicles for work purposes.
Another advantage of contract hire leasing is that it provides customers with fixed motoring costs. The monthly payments include the cost of the vehicle, as well as any additional services such as maintenance and servicing. This can help customers to budget and plan their expenses more effectively.
Disadvantages of contract hire leasing
One of the main disadvantages of contract hire leasing is that the customer does not own the vehicle at the end of the lease period. This means that they have no equity in the vehicle and cannot use it as a trade-in towards a new vehicle.
Another potential disadvantage of contract hire leasing is that the customer is tied into a fixed period of time. This means that if their circumstances change, such as if they need to downsize their vehicle or if their business closes, they may be liable for early termination fees.
In conclusion, contract hire leasing is a popular way to finance a vehicle in the UK. It provides customers with a cost-effective way to drive a brand new vehicle and fixed motoring costs. However, it does have its disadvantages, and customers should carefully consider their circumstances before entering into a contract hire leasing agreement.