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.
