If you have your eye on a brand new vehicle, you have the option of purchasing one – but you would then have to think about its depreciation, and you also have to think about how you can replace it – would you sell it or swap it for a new model? If you don’t want to think about the hassle of selling or swapping your vehicle but would still like to have a brand new model, then there may be another solution: contract hire or vehicle leasing. With this kind of arrangement, you don’t have to deal with depreciation and selling or swapping the vehicle – at the end of the arrangement’s term, you can simply hand it back to the provider, and you can choose another model. But there are other intricacies involved in vehicle leasing, so are you thinking of a vehicle lease? Here, then, are the answers to your top questions.
What is contract hire or vehicle leasing?
Essentially speaking, when you lease a vehicle, it’s not that different from renting any other thing, such as a house or flat. You will have to settle a deposit so you can use the vehicle for a set period, and you also have to settle a monthly fee. Once your contract has ended, you just give the vehicle back to the leasing firm. You only have to agree to use a certain number of miles annually, and once you do, then you’re set. To give you a clearer idea: if you opt for a contract for 24 months, then your first payment may be three to six times the monthly fee. If you have a deal for £150 per month, then you have to settle an upfront payment of £900 in your first month, which is then followed by 23 payments of only £150.
How does it work?
You will usually rent or lease the vehicle from a financing or leasing company, and the deal you get may greatly depend on the vehicle’s make and model, your agreed annual mileage, and the period of the contract. The vehicle will remain the leasing company’s property throughout, and when you hand it back, it will already have depreciated – but the leasing company may still be able to sell it for a profit since the pricing model for vehicle leasing can cover its depreciation.
How can I choose the best deal?
A contract hire and leasing deal will typically last from two to up to five or six years, and it is worth thinking about the duration because it can change the deal’s cost. You also have to think carefully about your limit on mileage as you don’t want to have to pay extra fees if you go over it.
You can look for many deals available online, and you can search via the particular model you want or search by inputting your budget, your preference in terms of the length of the agreement, or the type of vehicle you would like, such as a convertible or SUV. The trick, though, is to figure out your total expenses throughout the entire agreement, including the processing or admin fee that can sometimes be part of the contract. Once you have worked out that it is within your budget, then you can make your decision with confidence.
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