Leasing 101 - Leasing Guide

Welcome to The Leasing Guys comprehensive guide to Personal Contract Hire (PCH) and Business Contract Hire (BCH). Whether you're an individual looking for a new vehicle or a business seeking a fleet solution, leasing can offer numerous benefits along with some considerations. Let's delve into the details:

What is Contract Hire?

Contract Hire is a type of leasing agreement where you pay a fixed monthly fee to use a vehicle for an agreed period, typically 2 to 4 years. At the end of the contract, you return the vehicle, subject to BVRLA fair wear and tear and mileage limits.

Personal Contract Hire (PCH)

PCH is tailored for individuals who want to drive a new car or van without the burden of ownership. Key points include:

Positives:

1. Low Initial Cost: PCH typically requires a low initial payment, making it easier to afford a newer, higher-spec vehicle.
2. Fixed Monthly Payments: You'll know exactly how much you need to budget each month, which can help with financial planning.
3. New Vehicle Every Few Years: At the end of the contract, you can return the vehicle and upgrade to a new model, avoiding depreciation concerns.
4. No Depreciation Risk: Since you don't own the vehicle, you're not affected by its depreciation in value.
5. Maintenance Options: You can include maintenance packages, covering servicing and repairs, to protect yourself from any unwanted additional maintenance costs.

Negatives:

1. Mileage Restrictions: Exceeding the agreed mileage limit can result in additional charges, so it's important to estimate your annual mileage accurately.
2. No Ownership: You won't own the vehicle at the end of the contract, so you won't benefit from any equity.
3. Commitment Period: Exiting the contract early can incur hefty fees, so it's essential to be sure of your requirements before signing.

Business Contract Hire (BCH)

BCH is designed for businesses looking to manage their fleet efficiently. Here are the main points:

Positives:

1. Tax Benefits: Monthly payments can be offset against taxable profits, and VAT may be recoverable depending on your VAT status and usage of the vehicle.
2. Fixed Costs: Budgeting is simplified with fixed monthly payments, helping with cash flow management.
3. No Depreciation Worries: As with PCH, you're shielded from the depreciation risk associated with vehicle ownership.
4. Maintenance Options: You can often include maintenance packages, covering servicing and repairs, to further streamline fleet management.

Negatives:

1. Commitment Period: Exiting the contract early can incur hefty fees, so it's essential to be sure of your requirements before signing.
2. Fair Wear and Tear: You're responsible for ensuring the vehicle is returned in a reasonable condition, considering fair wear and tear guidelines.

Common Questions and Concerns

1. Can I modify the vehicle?
   • Generally, modifications aren't allowed without prior approval, as they can affect the vehicle's value.
2. What happens if I exceed the mileage limit?
   • Excess mileage charges will apply, typically calculated per mile. It's advisable to monitor your usage and adjust the contract if necessary.
3. Can I end the contract early?
   • Early termination can be costly, often requiring you to pay the remaining lease payments and sometimes additional fees. However, some providers offer early termination options with certain conditions.
4. Is maintenance included?
   • Maintenance packages are available, but they're optional. Including maintenance can provide peace of mind and simplify budgeting.

Conclusion

Contract Hire offers a flexible and cost-effective solution for both individuals and businesses seeking new vehicles without the hassle of ownership. By understanding the nuances of PCH and BCH, along with addressing common concerns, you can make an informed decision that aligns with your needs and budget.

Remember, when considering a lease agreement, it's crucial to read the terms and conditions carefully and consult with leasing experts, like The Leasing Guys, to ensure you choose the right option for you or your business.