Click on the links below for more information on each finance package we offer
to choose the right one for you.

Contract Hire:

Whenever you hear the term ‘car leasing’, chances are that it is referring to contract hire as it is the most common form of vehicle leasing agreement.

Basically contract hire means agreeing to take control of a car for a fixed period – it’s yours to drive but it is never actually yours to own. Instead you reach an agreement with the leasing company to make fixed payments (usually monthly) for the duration of the contractual period. At the end of the contract you return the car to the contract hire company.

Your contract hire payments will be determined by a number of factors. Firstly, there is the retail price of the car – that is the price you would have to pay if you were to buy it outright. Then, there is the residual value of the car – that is it’s estimated worth at the end of the contract taking into account depreciation, mileage, etc. You then pay the difference between the two figures in monthly instalments. So the higher the residual value of the car, the lower your payments will be.

What are the pros and cons of contract hire?

Many of the advantages and disadvantages of contract hire are a matter of perception – i.e. what’s right for one driver might be wrong for another, and vice-versa.

For example by taking out a contract hire agreement you never take ownership of the car. That may be a problem for some, but an advantage for others who like the idea of being able to return the car and walk away without dealing with re-sales, etc. Many contract hire agreements also include maintenance packages – meaning all you have to worry about is comprehensive car insurance and putting fuel in the tank.

Contract hire offers fixed-cost motoring – you know exactly what you will have to pay and when you have to pay it, helping you to budget. This also makes contract hire popular among VAT-registered companies who can reclaim 50% of the total payments made and 100% of the maintenance package costs. Hire rental tax allowances can also be applied.

On the downside you must return the car at the end of the contract – there is no option to buy as there is with a personal contract purchase agreement.

Who is contract hire right for?

Think about your motoring habits before deciding if contract hire is right for you. If you travel a lot, then your mileage will be high which will increase the car’s depreciation and therefore your monthly payments. If you have a flexible job and have to travel varied distances it can also be difficult to estimate your mileage – and if you exceed your mileage limit you’ll face additional charges.

However, if you want to be able to budget with fixed monthly costs, like the idea of not having to sell the car on and want to drive a new vehicle every few years, then contract hire is ideal.

It’s also perfect for businesses as it allows them to update fleets regularly with the latest vehicles, avoid large down-payments and adjust fleet size based on staff numbers.

If you think contract hire is the right form of car finance for you, call us now for our best quote.

Personal Contract Purchase - PCP:

Broadly, personal contract purchase is the same as a personal contract hire agreement – but with one key difference.

At the end of the contract, there is an optional balloon payment that the individual can choose to pay in order to take ownership of the vehicle. This amount is determined at the outset and allows the driver to keep the vehicle if they are happy with it. However, it is not essential – on the contrary, as with a personal contract hire deal, you could choose to return the car to the leasing company and walk away.

Monthly payments are based on the difference between the retail value of the car and the residual value – i.e. the estimated future value of the vehicle after depreciation is taken into account. Therefore, the more the vehicle holds its value, the better your personal contract purchase deal will be as that will reduce your monthly payments.

A mileage limit will apply to all personal contract purchase deals. This is because the leasing company will use the mileage limit to determine the vehicle’s depreciation and therefore its residual value. So it’s important to be honest with the leasing company about how much travelling you are likely to do – exceeding the mileage limit will lead to penalties.

Personal contract purchase is seen as a direct alternative to hire purchase and is subject to the protections set out in the Consumer Credit Act.

What are the pros and cons of personal contract purchase?

There are many advantages to personal contract purchase including:

• Fixed prices – You know exactly what you have to pay each month, which can help you budget.
• Initial down-payment – Only a small deposit is required.
• Option to defer payments – If you include a balloon payment at the end of the term, you can defer payments.
• Refinance – If you prefer, you can refinance the balloon payment at the end of the term.
• Maintenance packages – Most personal contract purchase agreements will include maintenance packages that can range from basic servicing to total vehicle management.
• No depreciation concerns – It’s not necessary to buy the car at the end of the term and so you can still choose to walk away without re-sale concerns.
• Access to more ‘upmarket’ vehicles – One of the key elements of a personal contract purchase deal is that it gives you access to previously unaffordable vehicles due to the low deposit and low monthly payments.

There are very few disadvantages to a personal contract purchase deal but it is usually more expensive than hire purchase agreements. It’s also worth remembering that you will have to arrange comprehensive car insurance as the car will not be yours until the balloon payment is made.

Who is personal contract purchase right for?

Generally, personal contract purchase is seen as the ‘best of both worlds’ in that you can choose to walk away from a deal, or exercise the option to buy.

Overall, personal contract purchase will generally be more expensive than traditional contract hire and hire purchase deals, but monthly payments are low. If you travel fixed distances and have a stable lifestyle, the mileage issue should not be a problem.

Consequently, personal contract purchase deals are well-suited to people who want to drive a car that would otherwise be unaffordable and who want to keep their options open with the right to buy.

Personal Contract Hire - PCH:

Personal contract hire is essentially the same as regular contract hire, but it applies exclusively to private individuals. It is the most common form of car leasing and usually when the term ‘car leasing’ is referred to, most people are talking about personal contract hire.

With a personal contract hire agreement you take control of a car for a contractual period – usually referred to as the ‘lease period’. Though the car is in your possession, it is not actually yours to own. Instead, you make fixed monthly payments to a leasing company for the duration of the contract – and when the contract expires you simply return the car to the leasing company or take out a new personal contract hire lease. As a result you never have to worry about resale values of the car – because you can simply return it and walk away.

It’s important to understand how your payments are determined.

The personal contract hire company will work out the ‘residual value’ of the vehicle – that is its value at the end of the contractual period once depreciation is taken into account. To estimate this value, the company will ask you to stick to a strict mileage limit while you drive the car – exceeding this limit could see you penalised at the end of the term.

To determine your payments, the company will deduct the estimated future value (residual value) from the retail price of the car – and you pay the difference in monthly instalments.

What are the pros and cons of personal contract hire?

There are many advantages to personal contract hire including:

• Fixed prices – You can hire both new and used cars at fixed prices and not have to worry about interest charges. This can help you budget.
• Cost effective – The monthly instalments for a personal contract hire agreement will generally be lower than those of a personal loan.
• Road fund licence – This should be included in the agreement.
• Maintenance packages – Most personal contract hire deals will include maintenance packages so you don’t have to worry about the general upkeep of the vehicle.
• No depreciation concerns – You don’t have to sell the car at the end of the term so you don’t have to worry about its depreciation.
• Access to more ‘upmarket’ vehicles – With a personal contract hire deal, you could afford a car that would otherwise be too expensive. As luxury cars tend to depreciate at the slowest rates, these often provide the best personal contract hire deals.

There are disadvantages to personal contract hire too, but generally these are bases on perception:

• Comprehensive car insurance – You will not be able to take out third party car insurance, you’ll need a comprehensive deal as the car is not yours.
• You never own the vehicle.
• No option to buy – Unlike a personal contract purchase agreement, there is no chance to buy the vehicle at the end of the contract.

Who is personal contract hire right for?

If you run a business, you should investigate regular contract hire as this will include VAT built into monthly payments and additional incentives such as hire rental tax allowances.

However, for private individuals, personal contract hire can be ideal dependent on your circumstances - just think about how you plan to use the vehicle.

If you travel a lot and your mileage is high, the residual value of the car will drop which will increase your monthly payments. However, personal contract hire gives you fixed monthly payments and you have the option to drive a new car every few years, which is an excellent incentive. So as long as you don’t mind not taking ownership of a vehicle, personal contract hire could be the right solution for you.

Finance Lease:

A finance lease is a VAT-free method of financing a vehicle that is usually accessed by VAT-registered businesses and companies. It is offered to businesses where a moveable asset (the vehicle) is purchased from a supplier – your business can then use this asset while paying an effective rental rather than a repayment.

The monthly rental is determined by the initial cost of the vehicle, the period of the finance lease and the residual value – that is the estimated future value of the vehicle at the end of the finance lease period once depreciation is taken into account. As a residual value is used to calculate your monthly rental, most finance lease companies will insist that you stick to a strict mileage limit as this mileage restriction is used to determine the future value.

You have full use of the vehicle during the finance lease period. Although you never take ownership, at the end of the finance lease contract a payment equivalent to the residual value is payable. Usually this means that the vehicle is sold and a proportion of the proceeds of the sale are returned to the lessee. Alternatively you could choose to pay the entire cost of the vehicle (plus interest) in monthly instalments.

Some finance lease companies may offer you the chance to extend the finance lease with a secondary rental.

What are the pros and cons of a finance lease?

There are numerous benefits to acquiring a finance lease. These include:

• Low monthly costs and initial outlay – One of the main reasons why companies take on finance leases is to avoid the initial hefty outlay.
• Flexibility – Most finance lease companies will offer a number of payment options to suit your cash flow. You can make deferred payments, lowering the monthly rental with a balloon payment at the end of the contract, or you can pay the entire cost in monthly instalments.
• Latest vehicles – You can gain access to the latest vehicles that would otherwise be unaffordable.
• VAT payments – Up to 50% of the VAT payments can be reclaimed.
• Balance sheet – Taking out a finance lease allows you to feature the vehicle on your balance sheet.
• Hire rental tax allowances can be applied for.
• Maintenance packages – These are often included in the finance lease meaning you don’t have to worry about the vehicle’s upkeep.
• Sales proceeds – You can boost your equity by receiving a proportion of the sale at the end of the finance lease term.

There are disadvantages to finance leases too. Primarily these are that you will never take ownership of the vehicle as the car or van must be sold to a third party.

Furthermore, interest rates can vary steeply from company to company and unless you’re savvy you could pay out much more than you need to. Be prepared to shop around for the best deals. Also watch out for unexpected fees including documentation fees, which are paid at the outset and additional charges from the finance lease company.

Who is a finance lease right for?

A finance lease removes the pressures of heavy initial outlays. It is a proven method of giving your business access to the latest vehicles without actually having to take ownership and buy them outright. There are also tax benefits too, which make this an ideal car finance method for many businesses.

Contract / Lease Purchase:

Broadly lease purchase is the same as PCP in that the leasing company has a retail value of the car and works out an estimated future value of the vehicle for the end of the contractual period based on its depreciation. This is known as the residual value. You can place a lump sum down-payment on the car upfront and then you make monthly payments on the difference between the retail value and the residual value. As a consequence, the more the vehicle ‘holds its value’, the better the deal – meaning luxury cars are often popular for lease purchase deals.

However, there is a fundamental difference between lease purchase and PCP. Whereas PCP gives you the option to buy the car outright at the end of the contractual period, with lease purchase you already have an agreement to buy the car. There is no return option.

Therefore at the end of the lease period, the customer must make a final balloon payment. This may be done through a cash payment or alternatively with additional finance or a part-exchange.

A typical lease purchase agreement will last from two-four years, though with most companies it is possible to settle the agreement at any point during this period.

What are the pros and cons of lease purchase?

You should think carefully before entering into a lease purchase agreement because it is not necessarily the right method of car finance for everyone. Here are its advantages:

• Luxury/prestige vehicles – Lease purchase is best suited to the finance of high-class vehicles due to the fact that you must take on the residual value. Higher residual values will also result in lower monthly payments.
• Company asset – Lease purchase is ideal for companies that want to retain the vehicle as an asset.
• Frees up finance – With lease purchase you take control of a vehicle while still holding money back to put into your company. Initial deposits are only usually the equivalent of three months’ payment.
• Low monthly payments – Payments are typically cheaper than hire purchase and the same Consumer Credit Act protections apply.
• Balance sheet – The vehicle can appear as a balance sheet item and you can write down the value against taxable profits.
• Ownership – Once the balloon payment is made, the vehicle is yours.
• Maintenance packages – You may be able to negotiate a maintenance package for the duration of the lease purchase agreement.

There are disadvantages to lease purchase too, including:

• Balloon payment – You must have sufficient finance to afford the balloon payment at the end of the contractual period because it is not optional. In some cases it can be higher than the residual value.
• VAT not recoverable – You can only reclaim VAT if the car is used exclusively for business use.
• Ownership risk – The car is yours and thus the effects of depreciation and the costs of maintenance and disposal are all risks throughout the contract.

Who is lease purchase right for?

For private customers, lease purchase is best suited to those who want long finance agreements as this will make your choice of car more affordable. As there is usually no mileage tie-in you can set it at any level depending on how high or low you want the residual value to be.

For businesses, lease purchase requires expert handling. The task of managing a fleet of lease purchase vehicles is not straightforward and you’ll need to scout the market thoroughly for the best deals. You can make it work for your business as long as you research thoroughly.

 Hire Purchase:

Hire purchase combines elements of both a loan and a lease. You reach an agreement with the dealer to pay an initial deposit and then pay off the balance in monthly instalments over an agreed period of time. At the end of this period, the car is yours.

Unlike a lease or a personal contract purchase agreement, the residual value of the vehicle is not taken into account. Instead your monthly payments on a hire purchase agreement are determined by the retail price of the vehicle, the size of the deposit and the length of the contract.

In effect, the contract is between you and the lender (usually a bank or broker) but is normally arranged by the dealer. The lender effectively buys the vehicle and allows you to use it while you make payments. Only when all payments are complete is the car officially yours.

What are the pros and cons of hire purchase?

The main advantage of a hire purchase agreement is that you can buy something you couldn’t otherwise afford.

Your monthly payments are effectively secured against your car – and this has both pros and cons. Positively, this means you’re more likely to secure finance than you would be by shopping around for an unsecured loan as the lender has some ‘security’ in the form of your car – this is often reflected in better interest rates.

On the downside however, you must be sure you can keep up with payments or the lender will have the right to repossess the vehicle. Normally this will apply if you’ve paid less than a third of the agreement – if you’ve paid more than that it is usually necessary for the bank to take you to court to either reclaim the vehicle or the remaining cash. For most however, this is a safer form of finance than a regular secured loan – which puts your house at jeopardy if you can’t meet repayments.

Interest rates can be high – they are usually determined by your credit rating. It’s also worth remembering that it’s not necessarily in the dealer’s interest to get you the best deal – they will encourage you to take hire purchase agreements so they can earn commission from the lender. Their objective is often to sell you money at the highest possible rate – so ask questions and be prepared to look around to other lenders for a better rate of interest.

It’s important to check out the APR to determine what the real cost of borrowing will be. Monthly payments will usually be higher than other forms of car finance, but in the long run the overall sum will usually be lower.

If you have a lot of money to put down on the vehicle you could secure a 0% finance deal. This will be a huge money saver – it could even save you as much as £1,000 for every £1,000 borrowed.

Reselling the vehicle during the hire purchase term can be complicated. You will still need to pay off the money you owe in full. Also watch out for early settlement fees and ‘option to purchase’ fees. These are not mandatory on hire purchase agreements but will be charged by some dealers.

Who is hire purchase right for?

Hire purchase is a good option for buying a large item that you couldn’t otherwise afford. If you want to take ownership of a vehicle outright, then the overall sum paid will generally be much lower than a personal contract purchase agreement although the monthly payments will be higher. With hire purchase you can afford a car without cashing in savings and investments.

However, getting a good hire purchase agreement is difficult – so you must be savvy. Don’t just accept the offers that the dealers present to you. Be prepared to ask questions and if necessary, shop around. Remember, the lower the APR, the lower the cash you will have to pay back in the long run. Work out the total amount you will have to repay and always read the small print.