Personal Contract Hire FAQs: What Is Contract Hire?

ontract hire describes the lease agreement between the vehicle provider and person or persons leasing the vehicle. The Finance and Leasing Association (FLA), recently found that personal contract hire is the fastest-growing form of finance — accounting for 11% of finance taken out on new cars.

But what is contract hire? It’s basically the long term rental of a vehicle and is also commonly referred to as “leasing”. The main difference is that a finance lease often offers the option for the customer to buy or sell the car once the lease period is up, whereas a contract hire always ends with the customer returning the car to the provider. This can be split into two main categories: personal and business contract hire. Here we look at the different types and discuss which is relevant to your needs and how they’ll benefit you.

What Is Personal Contract Hire?

Personal contract hire (PCH) is designed for private individuals looking to lease a vehicle. This is the standard leasing practice that most people opt for. Personal contract hire is one of the most popular ways of leasing a car, and — put simply — is a lease agreement between a provider and a person for the fixed-term use of a vehicle. Contract hire is very popular with businesses, so the main difference here is that the lease is for an individual rather than a business.

What Is Business Contract Hire?

Business contract hire (BCH) is designed for corporate entities and commercial organisations. It is common for businesses to invest in multiple vehicles, for example, fleets of taxis or vans. With BCH, companies that are VAT registered can make savings by claiming back 50% of the VAT on cars and up to 100% on vans. It also allows companies to have multiple lease contracts. The benefit to businesses is that leasing a contract hire removes the financial risk of owning vehicles. Businesses need not worry about the depreciation of their assets as the vehicle never belonged to them in the first place.

How Does Contract Hire Work?

First things first, you want to decide which vehicle you’re going to lease. Contract hire allows you to drive a brand-new vehicle in a more affordable way so that you’ll have plenty of options for new cars. New doesn’t have to mean expensive, either. Kardi Vehicles has a range of makes and models to cater to all tastes and wallet sizes — with budget-friendly options such as Kia, Fiat and Toyota, as well as well-known luxury cars, including Audi and Mercedes-Benz sports cars, Tesla electric cars and Land Rover estates. The cost of contract hire is made up of the initial deposit payment, followed by monthly instalments for the duration of the lease. The monthly hire amount is based on several factors, including the original cost of the vehicle, your agreed mileage and the length of the lease. One of the benefits of contract hiring a car is that you can choose a deal based on your specific needs. You’ll agree on the terms you want to lease the car on and your mileage allowance. Try to be realistic with your mileage limit to avoid charges. It’s better to have an accurate idea of how much you’ll be driving the vehicle and use that rather than basing it on a small amount to try and get a better deal.

How Long Does the Contract Hire Last?

Contract hire is entirely customisable to your requirements, so you decide on how long you want the hire to last. Typically, a contract hire agreement will be between two to four years, although Kardi Vehicles offers leases of up to six years! Some customers prefer a very short-term lease, and Kardi Vehicles can accommodate leases as short as six months. It’s always best to explore your options with a dealership and work with them to find a lease period that is most suited to you.

What Is Contract Hire Finance?

Contract hire is a form of finance, so there will be a credit application form as part of the lease process. Poor credit can be a barrier for some people hoping to contract hire a vehicle, as it can prevent finance companies offering to secure a lease deal. Kardi Vehicles understands cars are essential and that the contract hire process goes beyond simple facts and figures. If you have a poor credit history, Kardi Vehicles will work with you to find a solution.

What Are the Main Benefits of Contract Hire?

The main appeal for contract hiring a vehicle is affordability. It allows people that may not necessarily be able to buy outright to have a car. Apart from enabling them to afford a vehicle in general, it also allows drivers access to models they may not otherwise be able to afford. Leasing is also cheaper than personal finance for a new car. Contract hire doesn’t involve the interest you would be paying on a finance deal. The monthly cost of your contract hire will be significantly lower than what someone would pay towards personal car finance payments. You can also benefit from maintenance services offered by your provider. Kardi Vehicles’ “Lease Company Maintained Package” covers all maintenance and servicing costs for the duration of your contract hire, which is one less issue for you to worry about! Packages like this are optional and will incur additional costs, but you can always opt for our “Customer Maintained” package where the responsibilities lie with you.

What Is the Contract Hire End of Lease Process?

As a customer, one of the main benefits of leasing a car is that you don’t need to worry about the car losing value over the lease period. Depreciation affects the value of a car every year, and car owners pay the price of that when they come to sell, but you won’t have those issues. That’s not to say that you shouldn’t look after the vehicle you lease. Just because you don’t own it, doesn’t mean you can’t take pride in it! One of the requirements for leasing a car is that you must keep it in good condition for the duration of your lease. The beauty of contract hire is that you can have another, brand new car once your lease is up. Once your car is returned, you can start the process again with the latest model that has caught your eye! And with Kardi Vehicles, you don’t need to take your car back to the dealership either, in the same way they deliver it to your work or home address initially, they’ll collect it at the end of the lease too. Contract hire is ideal for drivers that want the luxury of a new car, but with the affordability and reduced risk of a lease.

Personal contract hire is the perfect way to lease a car. Get started today by contacting us for a custom quote, or call 0190 8 10 60 80.