Few things in life depreciate at the same rate as a new car. It is often said that as soon as you drive a new vehicle from the forecourt, you lose a massive percentage of the car's value. However, there are ways to counteract this huge loss in asset value; one of which is by bypassing the purchasing of the vehicle to lease the vehicle on a personal contract hire agreement.
Personal contract hire is the most common form of vehicle leasing and is both cost-effective and simple to manage. With a personal contract hire agreement, the lessee takes control of a vehicle over the course of the lease agreement and, in return, pays fixed monthly payments to the lessor. Ownership of the vehicle is always retained by the lessor and is never transferred to the lessee.
In order to work out the monthly payments that the lessee must make; first, the lessor must establish the expected residual value of the vehicle at the end of the agreement. The way this is calculated is by setting an annual mileage limit that the lessee must stick to or face extra fees based on a per-mile infringement. Once the residual value is estimated, the lessor can work out the fixed monthly payments that the lessee needs to make.
Amongst all the pros for personal contract hire agreements, there is one that stands out for the majority of lessees, that being the reduced responsibility involved, compared to purchase agreements. The nature of a contract hire agreement is that once the contract is over, you give the car back and that's it. You could then organize another personal contract hire with another brand new car. You can also purchase an add-on in the form of a maintenance agreement with your contract hire agreement which will reimburse you for any repairs or general maintenance you have had to carry out over the life of the contract.
With all personal contract hire agreements, your road fund license for the vehicle will be paid for by the lessor, plus you will not have to lose sleep over the depreciation rate of the vehicle as you will not be selling the vehicle at the end of the contract. The monthly costs of personal contract hire agreements are usually much cheaper than personal loans, so it makes for a much more cost effective solution to the problem of vehicle acquisition.
All in all there are very few disadvantages to personal contract hire. With this type of vehicle contract hire, you will have access to cars that are normally out of your price range. More expensive 'luxury' vehicles tend to depreciate at much slower rates than cheaper vehicles and, therefore, make great lease cars and a much more economical choice.
Personal contract hire is the most common form of vehicle leasing and is both cost-effective and simple to manage. With a personal contract hire agreement, the lessee takes control of a vehicle over the course of the lease agreement and, in return, pays fixed monthly payments to the lessor. Ownership of the vehicle is always retained by the lessor and is never transferred to the lessee.
In order to work out the monthly payments that the lessee must make; first, the lessor must establish the expected residual value of the vehicle at the end of the agreement. The way this is calculated is by setting an annual mileage limit that the lessee must stick to or face extra fees based on a per-mile infringement. Once the residual value is estimated, the lessor can work out the fixed monthly payments that the lessee needs to make.
Amongst all the pros for personal contract hire agreements, there is one that stands out for the majority of lessees, that being the reduced responsibility involved, compared to purchase agreements. The nature of a contract hire agreement is that once the contract is over, you give the car back and that's it. You could then organize another personal contract hire with another brand new car. You can also purchase an add-on in the form of a maintenance agreement with your contract hire agreement which will reimburse you for any repairs or general maintenance you have had to carry out over the life of the contract.
With all personal contract hire agreements, your road fund license for the vehicle will be paid for by the lessor, plus you will not have to lose sleep over the depreciation rate of the vehicle as you will not be selling the vehicle at the end of the contract. The monthly costs of personal contract hire agreements are usually much cheaper than personal loans, so it makes for a much more cost effective solution to the problem of vehicle acquisition.
All in all there are very few disadvantages to personal contract hire. With this type of vehicle contract hire, you will have access to cars that are normally out of your price range. More expensive 'luxury' vehicles tend to depreciate at much slower rates than cheaper vehicles and, therefore, make great lease cars and a much more economical choice.
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