What does personal contract hire mean?

12th Jul 2021

What does personal contract hire mean?

If you’re looking for a new vehicle that won’t depreciate, it’s time to consider leasing. Offering numerous benefits including simple payment terms and no road tax, leasing puts a safe, reliable car in your hands without a huge down payment.

Many companies choose to lease based on these benefits, as well as tax breaks. But for individual use, ask your broker about a flexible personal leasing contract.

How personal contract hire works

Leasing is essentially renting a car for a set period – for example, we offer 12 months up to four years. You’ll pay a non-refundable deposit (usually three times your monthly payments) and then commit to fixed payments until the end of the contract. When your contract is up, simply hand over the keys and walk away, or negotiate a deal on a newer car.

The longer the lease period, the cheaper your monthly payments will be.

What do I need to lease a car?

Have a think about the type of vehicle you’ll need based on its use, for example, a small run-around or a larger family car. You’ll also need to consider mileage, as leasing comes with mileage limits to prevent the car from losing too much value.

When you speak to a broker, he or she will run a credit check. Like any contract, a lease is a finance agreement, so your lender needs to see evidence that you can pay. There are options if you do have bad credit, but these will be more expensive.

What will I get with a personal car lease?

Once your contract period is agreed and you’ve made your down payment, you’ll get:

• A brand-new vehicle with a warranty

• No road tax

• Maintenance options like servicing and replacement tyres (negotiable with your broker)

• The option to talk away when the contract period is up.

You WON’T get:

• Fuel

• Insurance

• Unlimited mileage*

*You will agree a mileage limit with your broker. You’ll have to pay a fee if you exceed this.

Can you end a personal contract hire early?

Yes, you can, but this is down to the discretion of your broker, and you will have to pay a fee – which can be the length of the entire contract!

Can I buy my personal contract hire car?

If you want to own the car at the end of your rental agreement, you should consider a personal contract purchase (PCP) instead. Monthly payments are typically lower on these agreements as you have to pay a ‘balloon payment’. This is a large payment as it includes accrued interest, but will be less than buying a brand-new car, as it factors in depreciation.

You can agree your balloon payment in advance, but if you do opt for lower monthly payments, make sure you have enough funds to pay a larger sum at the end.

Does personal contract hire show up on a credit report?

Yes, it does, but this is no cause for alarm. It’s no different from any other kind of payment, for example a phone bill or mortgage. If it does lower your credit score, this will be temporary. The worst thing you can do is miss a payment – this will also affect your eligibility for leasing future cars.

Choose the right option today

If you’re confused about payments, mileage, or simply what car to choose, speak to one of our experts here.