WHAT IS CONTRACT HIRE?

Perhaps the easiest to understand way to finance a car. Contract Hire does not require working knowledge of residual values or Optional Final Payments.


PAYMENT STRUCTURE

The payments are kept simple - a monthly cost, preceded by an up-front payment (which is usually a set number of months of the monthly charge - 3, 6 or 9).

Things to look out for are:

  • Length of contract
  • How many miles you can do in the vehicle
  • If VAT is included

​WHY HIRE?

It's common knowledge that vehicles depreciate so for those concerned about the residual value of their vehicle, not having to worry about this is an attractive prospect. Essentially you do not own the car, but you are leasing it from a leasing company. In fact, Contract Hire is often referred to as Vehicle Leasing. 

HOW ARE THE PAYMENTS WORKED OUT?

Even though you don't need to, it's interesting to know how the payments are calculated and why you are paying the price you are. Essentially the Contract Hire company will calculate the residual value of the vehicle at the end of the proposed contract length, and then subtract that figure from the cash price of the car. The difference is what you pay, split monthly.

WHY WOULD YOU NOT HIRE?

The main reason not to hire is that for those wanting to own their vehicle, Contract Hire is out of the question. We offer Personal Contract Purchase which gives similar benefits with an option to purchase at the end, so if this is more what you are looking for click here to visit our PCP page.

You will need to take out Comprehensive insurance as you do not own the vehicle, and fair wear and tear policy applies as well as a mileage limit. If you do a lot of miles, the residual value will be lower and therefore your monthly payments will be higher, but it could still work out as one of the cheapest ways to finance your vehicle especially if you take out a service package.