What does personal contract hire mean?

25/09/2021 | Steve Lumley

What does personal contract hire mean?

When it comes to leasing a car in the UK, you may hear the term 'personal contract hire' but what does this mean?

Put simply, the terms 'personal contract hire' and 'car leasing' are interchangeable.

They both offer an affordable way to get behind the wheel of a brand-new car without having to buy it outright.

Personal contract hire runs along similar lines to other contract hire or rental agreements but applies to a named individual.

This is a popular way to lease a car and a personal contract hire agreement is simply another term used instead of using 'personal car leasing deal'.

Under a personal contract hire deal, you will get to drive a brand-new car for an agreed period.

It's also important to appreciate that while you have a contract hire agreement in place, you do not own the car.

And when your agreement ends, there's no possibility of buying it from the car leasing firm.

So, you will make fixed monthly payments over the agreed period and look after the car with servicing and maintenance.

Some personal contract hire deals will allow you to have the maintenance and service element added so you'll enjoy peace of mind motoring knowing that everything is taken care of.

Who personal contract hire deals are aimed at

When you look to lease a car, you may be wondering why you can drive a brand-new car at a low monthly price, but you will need to understand the residual value of the car.

Essentially, you are paying to rent the car and during the time you drive it, it will fall in value. This is known as depreciation.

When you buy a brand-new car, this depreciation can be a hefty amount to handle - most cars will lose up to 40% of their value in the first three years alone.

However, when you lease a car the worry over the residual value lies with the car leasing company and it's not a problem for you.

Also, with personal contract hire you don't have to worry about disposing of the vehicle when the lease ends, such as having to trade it in or selling it privately.

Leasing a car is just like renting a property, and personal contract hire should be seen as a long-term rental.

Under your agreement, you also decide how many miles a year you will travel because this also has an impact on the monthly price.

Indeed, you need to calculate what your car leasing mileage will be because if you go over it, you'll be hit with an excess mileage charge.

This charge will vary between car leasing companies in the UK from just a few pence per mile, to much more.

It's always best to overestimate how many miles you think you will travel and work to that figure.

It's also worth bearing in mind that the mileage a car travels will also affect its value, and this will be reflected in the monthly payment.

However, a personal contract hire deal will see you driving a brand-new car and when your agreement ends, which could be in two, three or four years when you lease a car with Tilsun Leasing, you can decide to switch to another brand-new lease car or hand your current vehicle back.

However, you need to be aware of the term ‘Fair wear and tear’ which means you will not need to pay for minor damage – but you will have to for serious damage. These damage rules are detailed on the BVRLA’s website.

In many ways, a personal contract hire deal offers flexibility because you decide what you want to drive, how many miles you will do and how long the agreement will last for.

Another important issue will be the initial payment.

The initial payment is a multiple of the agreed monthly amount and if you pay more, then your monthly payments will reduce.

Personal contract hire benefits explained

For some people, it may appear to be a deal that is too good to be true, but there are lots of benefits to personal contract hire. They include:

  • Monthly payments

You will know exactly how much you need to pay under a personal contract hire agreement - there will be no surprises

  • Convenience

If you would love to drive a new car but can't afford it, or you simply do not want to spend a large chunk of cash on buying a new car outright, then personal contract hire could be for you

  • Maintenance

With a personal contract hire agreement, you can sign up to a maintenance and service package so there's a lot less to worry about when driving.

 

Personal contract hire deals with Tilsun Leasing

As explained, personal contract hire agreements are a straightforward way to get behind the wheel of a brand-new car at an affordable cost and if you want to find out more about the benefits, speak to the team at Tilsun Leasing on 03330 040 888.

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