What is Personal Contract Hire?
Personal Contract Hire is a credit agreement between you, the consumer & a lender. This arrangement is one whereby you’ll drive but never own the vehicle & therefore best explained as the long-term ‘lease’ of your chosen new car for an agreed period. In return for your extended commitment, there’s more time for the lender to manage the car’s projected depreciation & because you’ve become part of a buying collective, typically you’ll benefit from generous reductions translating into a very competitive monthly rental.
Monthly rentals for Personal Contract Hire are calculated from a combination of the purchase price & estimated future resale value. The bit in the middle, the vehicle’s projected depreciation, is the part you’ll be paying for, this the main reason you’ll find such variability of pricing & different Personal Contract Hire offers at varying times of the year.
Sometimes it’s a good idea to keep an open mind on your final choice of prestige car lease, this way you might actually find a lower Personal Contract Hire rental on a more expensive model than you’d initially considered, that’s if you are prepared to be a little flexible on matters like colour, engine type or even how quickly you might be able to take delivery. When prestigious manufacturers are looking to ‘cut a deal’, the recommended retail price only tells part of the story, so this is often an excellent opportunity to bag yourself a Personal Contract Hire special offer.
Estimated resale values are never your problem with Personal Contract Hire, they are exclusively a responsibility & risk of the lender, but one thing’s fair enough, the more miles you cover the lower a lender’s likely resale value will be, hence your monthly rental will more expensive & so best to estimate your total contracted mileage carefully.
In summary, Personal Contract Hire agreements are straight forward & easy to understand. There are flexible options on initial payment, followed by further monthly repayments over an agreed period. At the end of the deal, your car will be collected, but you need to make sure things like the spare keys, driver manuals & equipment you could have removed, like head restraints, are all enclosed within the car on the day of collection. If you’ve exceeded the total contracted mileage there will be additional, but reasonable, charges to pay. The same can be said if the general status of your car falls outside of the conditions deemed as fair wear & tear, but if you’ve cared for the vehicle as if it were your own like most individuals do, then there’s usually nothing else to pay
Why Choose Personal Contract Hire?
If you think about it, nearly every private owner of a new or almost new car is in effect leasing their vehicle, even if they didn’t take out a Personal Contract Hire agreement, but some folk just haven’t looked at it this way (& they probably should). On occasion, even today we still hear comments like “But I’ll have nothing to show at the end of the lease?” So, let’s take a moment to understand better why Personal Contract Hire is ‘the’ way to drive a new prestige car & ownership is a thing of the past.
Remember the moment when you purchased your last car; it was a nice feeling, the smell of the new interior or the perfect coat of paint all added to the experience — perhaps using your own cash or some sort of loan, possibly even a hire purchase with a cash deposit or the balance from a part exchange? You paid the asking price, or maybe you haggled for a deal, perhaps you settled on an older model or a nearly new car was that significant saving off the list price seemed a good idea at the time?
Either way, you drove the car for several years, paid for each year’s road tax as & when, but had no idea how much your new car would have been worth in the future, you might even have found this unsettling? Maybe the used car market boomed & you swerved that ‘downturn’, but at some stage, the new car effect wore off or you just fancied a change, whatever the reason, you decided to sell the car back to a retailer or perhaps some other way, to realise the highest amount. Either way, did you get the price you wanted & did you enjoy the experience? Probably not! Did you receive less than you thought you should or had hoped for? Maybe?
One thing is for sure, the sale price you settled on for your old car was a lot less than you paid. When you add back in the interest charges on a traditional loan, or the better deployment of your savings if invested elsewhere onto the whole balance, plus the actual depreciation you’ve experienced, the picture starts to become a lot clearer & why Personal Contract Hire is such a good idea.
The fact that you’ve been leasing all along, just using your own money to fund things, taking on all the resale risk, indeed for most people doesn’t add up & Personal Contract Hire has transformed the car buying attitudes of thousands of private individuals over the years who in the future will always lease & never own.
Put, owning your vehicle is typically more expensive & certainly more time-consuming, so leasing with a Personal Contract Hire is more convenient, more affordable, and you’ll enjoy all the benefits of a new prestige car & most certainly without any of the risks involved with vehicle ownership
Is Personal Contract Hire Right For You?
The advantages of Personal Contract Hire:
Future vehicle residual & resale values are not your concern
Low initial outlay, but options to pay more if that suits you best
A choice of the rental period, from 24 to 60 months
Annual road tax included within the monthly rental
Exiting the agreement with a pre-agreed termination charge
Competitively priced Maintenance packages are often available
Know where you stand with ‘whole life’ agreement costs
Look after your vehicle & there’s a simple ‘hand back’ process at the end
Perhaps afford a car of a higher retail price than you thought possible
Perfect for Prestige Car Leasing
Key Areas for consideration, is Personal Contract Hire right for you?
Termination charges apply when for whatever reason you end the agreement early
You will never own the vehicle
Changes in your circumstances might mean you could no longer afford the rentals
You’ll need to be free from an adverse credit history
If you don’t look after the vehicle, or put things right, charges will be payable at the end
Fully comprehensive insurance cover, with you as the named driver without exception
Changes in the prevailing rate of VAT will influence the total balance repayable
Changes to the annual rates of road tax will impact the total balance repayable
* Subject to terms and conditions of a credit agreement with the lender.