Wednesday, December 5, 2018

What You Need To Know About Personal Contract Hire


Personal Contract Hire is a term more commonly used in today’s world, but before we get into the technicalities of what it is, let us understand what it means.  Usually, you hear of people applying for a car loan to buy a car and when their loan is paid off they own the car or have to make large final payment. However, when it comes to Personal Car Leasing, you only have ownership of the car for a certain period, which is called the lease period. During your contract period, you pay a certain amount to the lease company every month.

When the contract ends, you do not own the car and you will not be given the option, to buy the car. You simply return the car to the company and if you want to, sign a new contract for a newer car.

How does it work?

Personal Car Leasing is a form of car rental, which is not only extended to businesses but also to individuals. Once you decide to go for a personal car lease, you will have to sign a contract that will specify the duration of the lease and also agree an annual mileage. At the start of your lease, you will need to pay an initial payment followed by monthly instalments. Of course, if you pay a larger amount at the beginning, your monthly payment amount will be less.

Your monthly payment amount is calculated by using certain factors.. The leasing company will estimate the residual value of the vehicle, which means the value at the end of the contractual period (which has depreciation considered as well). This is why the company will agree your mileage at the beginning of your contract as this does influence the resale price at the end of your contract.

The company will deduct the estimated residual value from the retail price of the car, and then you pay the difference in the form of monthly instalments. Once the contract is over, you return the car to the company as per the conditions stated.

A little more about the payments

There are certain components that make up your payment cycle, when you are looking to go for personal contract hire. To begin with, there’s an initial payment, which is a non-refundable amount equivalent to either one, three, six or none monthly payments. When you pay a lump sum amount right in the beginning, your monthly payments reduce. Other charges, including a one-time document processing fee, might also be included. Next comes the monthly price, which is the fixed amount you pay every month until your contract ends.

The annual mileage is decided at the beginning of the contract. If you exceed the agreed mileage, you will have to pay a penalty. The penalty amount will be stated in your agreement.   If during your contract you know you are going to exceed your mileage, it’s always best to call your car leasing company to see if they can renegotiate your contract.