CONTRACT HIRE - What is it?
Contract hire is the term used to describe an agreement where you lease a car for a set period of time, usually two, three or four years.
Rather than buying a car outright, you simply lease it from us for a fixed period and make a monthly payment. At the end of your contract hire agreement, you return the car to us; you never actually own the car.
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Contract hire payments
One of the key benefits of car contract hire is that it allows you to minimise the effects of depreciation that you would suffer if you were to buy a car.
Your contract hire car monthly payments are calculated by taking the value of the car as new and subtracting its residual value at the end of your leasing agreement. The difference between these two amounts is then divided by the number of months your agreement is due to run to give you a monthly figure.
For example, if a car was worth £10,000 new and estimated to be worth £6,400 after 3 years and taking into account your mileage, the difference would be £3,600. This would then be divided by 36 (the number of months you've leased it for) to give you a monthly payment of £100.
Contract hire cars - advantages
The advantages of contract hire are many but this type of agreement doesn't suit everyone's circumstances. Here are some of the overall advantages:
- Know exactly what you'll pay each month
- Maintenance packages can be included for complete peace of mind
- Reduce the impact of depreciation
- No hassle of trying to resell your car
- An affordable way to get a new car on the road
Does contract car hire suit you?
This type of car leasing is not the best solution for everyone, but for example if you have a job with a set amount of travel each month, it could be perfect as you can choose a mileage option to suit you.
However, if your travel is unpredictable and varies widely from month to month then exceeding your agreed yearly mileage will involve additional costs as it has a negative impact on the residual value of the vehicle at the end of your contract hire period.
If you have any questions about contract hire cars or agreements, give us call now on 0800 298 2030 and we'll be happy to help.
Request your online contract hire car quote now.
