A guide to leasing cars, personal contract purchase, personal contract, and Hire Purchase
The car leasing directory aims to highlight national and local car and van hire networks. Included within each car leasing company listing are details of leasing and finance services offered and other useful information.
A Guide To Car Leasing
This is an option being followed by increasing numbers of private drivers as a means of having a new vehicle ready for use including road tax, insurance, fully serviced for the period and breakdown cover.
This way the driver has only to put fuel into the tank and all other regular motoring costs are undertaken under the car leasing arrangement.
There are three main types of car leasing available to the public. These are; Personal Contract Purchase, Personal Contract Hire and Hire Purchase. If you are surprised to see hire purchase included, all is explained further down the page.
The first option, Personal Contract Purchase (PCP), is a very popular and convenient choice of car leasing for private drivers that want to keep their monthly outgoings to a minimum. This is achieved by the future value of the car (its value at the end of the agreement) being agreed, guaranteed and underwritten by the finance company at the beginning of the car leasing agreement, based on a total contract mileage. This way the finance company will take possession of the vehicle at the end of the leasing term and the amount of the finance agreement is the difference in value from new to when it is handed back i.e. the agreed amount of price depreciation, thereby reducing monthly payments. Full service maintenance and breakdown cover can be included within the car leasing contract if required.
This type of car leasing is particularly suitable for private individuals, employees opting out of company schemes and directors wishing to run their vehicle outside the company, who wish to have the use of a new car with low initial outlay. It is particularly helpful if they can accurately forecast their annual mileage.
There are many benefits of this form of car ownership including the low deposit required and the guaranteed end value, which means there is no risk over the possible residual value at the end of the leasing term. Full car service maintenance can be included, the monthly payments are low and the purchase can be made on bulk purchase, fleet terms.
Drawbacks are, any travel over the agreed contract mileage has to be paid for as an extra (as it decreases the agreed residual value) and the agreed future value is based on the vehicle being in good condition at the end of the leasing term as anything less will incur penalties.
The second car leasing option, Personal Contract Hire (PCH), provides the vehicle at a fixed equal monthly cost, the rental amount, for the fixed term of the contract and for an agreed maximum mileage. At the end of the leasing contract term the car is simply handed back to the finance company. The finance company decides the rental cost based on their forecast of the depreciation over the term of the contract.
Like PCP, this car leasing scheme has also proved popular with private members of the general public and employees who are given an allowance in-lieu of a company car. It provides the security of having a monthly payment that includes full servicing and breakdown cover if required, and suits those drivers that can accurately forecast their mileage. The lower the mileage the lower the potential rental.
Benefits of the leasing scheme include the avoidance of benefit-in-kind taxation that is attracted by company cars, there is a relatively low initial rental, full maintenance can be included and importantly, the finance company takes on any risks associated with the residual value.
The third option included here is Hire Purchase. We have included it as, under this car finance option, the vehicle remains under the ownership of the finance company until the very last payment is made.
Hire Purchase is more applicable to individuals interested in a more traditional way of financing a car or light commercial vehicle. A financial outlay by way of an initial deposit is payable at the outset, this can vary but is not usually less than 10% of the value. This is followed by fixed, equal monthly payments for the term of the agreement. Once the final payment is made, ownership of the vehicle automatically passes to the hirer. Under this scheme, the hirer is taking responsibility for the residual value of the vehicle.
Suitable, again, for members of the general public and employees opting out of company car schemes, as well as those people wishing to invest a larger amount of capital in a higher deposit and spread the smaller balance over equal payments. For people who want eventually to own their car and take control over the tax, car insurance and maintenance aspects of running a vehicle, hire purchase is an attractive option.
The benefits include a deposit (over 10%) of a sum suitable to the individual, lower equal monthly payments, the vehicle belongs to the hirer on completion of the payments and the hirer has complete control over the upkeep of the vehicle.
The car leasing choice is yours.