Contract hire is available for both business and personal buyers who are buying new motors. There are other options available, let’s say paying for it in cash or taking out a special vehicle loan, but many people are realising that contract hire holds a lot of advantages that other forms of car purchasing do not carry.
Contact hire vs purchasing outright
For a start, with vehicle contract hireyou are not purchasing the car outright. There is no huge single outlay to record on the books. You do not have to find all of the cash in one go to be able to drive away your vehicle, or your fleet of motors.
Also, there is no vehicle at the end of the period that needs to be disposed of with the costs associated with getting rid of the vehicle when it comes to time to replace it. There are also no depreciation concerns to worry about between now and the end of the contract.
Contract hire vs car loan
With a loan you are still left with a lump sum payment up front as a deposit and quite often very high monthly interest rates. And through the duration of your ownership of the new vehicle, you are paying for everything. Should the car be written off during that time you will need to continue paying for the loan, unless you have suitable additional GAP insurance to cover the costs.
With contract hire, you know exactly what your monthly payments will be and you could even agree that little extras such as maintenance and vehicle excise duty will be included in the monthly fees.
You agree with the firm that you are working with how long your contract hire will last. You might want merely a couple of years or you may want to have the vehicle for a lot longer, it is up to you. Depending on your needs you might even want to include several extras, let’s say maintenance and car tax.
There are also other financial incentives for vehicle contract hire, especially if you are in business. For instance, the VAT element of the monthly payments could be simply reclaimed for VAT registered business.
Contract hire is a very good way of avoiding having to pay out the full price of the vehicle in one go whilst guaranteeing your monthly payments. And usually, if you get to the end of the hire period and want the car for a little while longer, you can either extend the period of hire or even buy the car outright.