Few things in life depreciate at the same rate as a new car. It is often said that as soon as you drive a new vehicle from the forecourt, you lose a massive percentage of the car’s value. However, there are ways to counteract this huge loss in asset value; one of which is by bypassing the purchasing of the vehicle to lease the vehicle on a personal contract hire agreement.

Personal contract hire is the most common form of vehicle leasing and is both cost-effective and simple to manage. With a personal contract hire agreement, the lessee takes control of a vehicle over the course of the lease agreement and, in return, pays fixed monthly payments to the lessor. Ownership of the vehicle is always retained by the lessor and is never transferred to the lessee.

Over the course of the personal contract hire agreement, the lessee must make fixed monthly payments to the lessor, which are based on the depreciation of the vehicle over the term of the contract. The residual value of the vehicle at the end of the contract determines the monthly payments that the lessee needs to make. To estimate that figure, the lessor must make certain stipulations in the contract that the lessor must adhere to, such as a limited annual mileage and vehicle condition.

The benefits to personal contract hire are vast. One of the most important to most people is the decrease in responsibility that the lessee has in comparison to other forms of vehicle purchase agreements. At the end of the contract, once the last payment has been made, you are free to hand the keys to the vehicle back to the lessor and walk away, literally. Also, you have the option, with most lease companies, to purchase an additional maintenance agreement which will pay for any repairs or replacement parts that the vehicle needs during the course of the contract.

Another benefit of personal contract hire agreements is that because you will be leasing the vehicle, you don’t have to be concerned about the depreciation and subsequent future resale value of the vehicle, plus your road fund license will also be paid for by the lessor. Moreover, monthly payments for hire contracts are generally lower than the equivalent amount in the form of personal loans from financial institutions.

All in all there are very few disadvantages to personal contract hire. With this type of vehicle contract hire, you will have access to cars that are normally out of your price range. More expensive ‘luxury’ vehicles tend to depreciate at much slower rates than cheaper vehicles and, therefore, make great lease cars and a much more economical choice.

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