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An ultimate guide to car leasing; Personal and Business

The process of buying a car for business or personal use can be a stressful one, there are a number of things that need to be considered before the purchase. One of which is the depreciation of the car. As soon as it is driven off the lot the price of said car starts to go down and the longer you own the car the less it is worth.

The introduction of contract hire by the automobile industry has revolutionized the market and given their customers a way to eliminate the negative effects of depreciation in a cost effective manner. This guide is designed to breakdown the leasing process into easily manageable chunks while also determining who it is right for.

Personal Contract Hire (PCH)

What is it?

A ‘Personal Contract Hire’ involves leasing a car from a car leasing company for an agreed period of time at a fixed cost that is normally paid monthly, unless otherwise stated. Aimed at private individuals, this method of leasing works out to be cost effective and increases motoring flexibility. The PCH is the most common form of leasing because it puts the customer in control of the car for the ‘lease period’ and because the car is not actually yours to own. When your contract expires, you simply have to return it to the leasing company or renew your lease. The condition of leased cars being returned need to meet the ‘Fair Wear and Tear’ guidelines that have been put into place by The British Vehicle Rental and Leasing Association. This process eliminates the stress involved with selling an old car or buying a new car.

How to Pay?

The most important aspect of leasing a car is to understand the payment system and how your costs are determined. The PCH normally works out the residual value of the vehicle, which is what the car will be worth after the personal contract has expired, taking into account depreciation. In order to stick to the estimated value, the leasing company will suggest a mileage limit to the customer. Exceeding this limit might incur some additional charges. Your monthly payment is determined by deducting the estimated residual value from retail price and then multiplying the result by the duration of your contract in months.

What do you get?

On 99% of deals the leasing companies provide their customers with Road tax for the duration of their contract with them. Some leasing companies include a vehicle management package for servicing and maintenance. You also get a complete breakdown of your contract, the terms and your mileage. This goes without saying but you also get complete guidance and support throughout you time with us.

Pros and Cons of PCH?

Who is PCH right for?

The PCH as the name suggests is ideal for individuals, the first thing to consider is what exactly you are going to be using the vehicle for. This is important because depending on your intended usage you might end up with a high mileage and have to pay more monthly compared to someone on a lower mileage.

Business Contract Hire (BCH)

Business Contract Hire or BCH is probably the easiest and most cost effective form of car leasing available to companies at the moment. With over half of all new company cars being funded this way it has grown to become one of the most popular forms of leasing business vehicles.

What is it?

Business Contract Hire is an agreement between a trading business (LLP, PLC OR LTD) and a finance company. Just like the Personal Contract Hire the vehicle is still owned by the leasing or finance company, the business is just paying the depreciation cost of the vehicle, the difference is that this form of leasing is targeted specifically at companies. The trick for business wanting to lease vehicles instead of buying them is to find a car that holds its value over time so that the depreciation cost will be lower. The duration of this form of leasing varies, it could be for 12 months or for 48 months depending on the business and their needs. When the contract expires, all you have to do is return the vehicle to the leasing company.

What you get?

You get your Road Tax already paid for throughout the length of your contract, with some leasing companies you might also get a total vehicle management package. You also get a custom contract that has been tailored to your specific needs and lastly you are entitled to additional options like maintenance and detailing for an extra cost.

How to Pay?

Understanding your payment systems and the eventual cost of your lease is very important. The leasing company normally works out the residual value of the car which is how much the car will be worth at the end of your lease once depreciation has been taken into account. For a correct estimate the leasing company will inform you to stick to a specific mileage while driving the car, exceeding this limit could incur additional charges at the end of your contract.
Your monthly payment is determined by deducting the estimated residual value from the retail price of the vehicle and the multiplying the result by the duration of your contract in months.

Pros and Cons of BCH?

Who is BCH right for?

Depending on the needs of your business fleet there are a wide variety of deals available that can easily save you and your business money down the road.

Check out Leden Leasing to talk to one of our experienced and friendly staff or to check out some of our exclusive Personal and Business Contract Hire deals.

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Posted on 22nd August 2016 at 12:11 PM

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