Car Leasing Blog

Personal Lease Hire is a commonly used phrase for personal leasing.

Basically, it falls into two different catagories

Personal Contract Purchase ( or PCP)

This is a regulated hire purchase agreement which normally needs to be signed on trade premises.

It encompasses a fixed rental (which includes VAT) over a fixed term and fixed mileage. Once the term has completed there is an option to return the vehicle to the funding company or pay a final payment to own.

Very importantly, should you wish to return the vehicle (which most people do) you should notify the finance company before the end of the contract.

More information on PCP Contracts can be found here

http://www.carleasingblog.co.uk/2007/11/09/pcp-contract-information/

Personal Contract Hire ( or PCH)

Personal contract hire is very similar to conventional contract hire. Once again fixed term, fixed mileage, fixed price.

One of the benefits is that PCH normally will provide road fund licence (road tax) for the term of the contract.

Also, there is no need to notify the leasing company to return the vehicle - they will contact you.

More information on Personal Leasing and PCH can be found here

http://www.carleasingblog.co.uk/2007/10/22/personal-car-leasing-top-10-tips/

If you, or one of your friends are considering terminating a car leasing contract early, you really need to read this. The implications for terminating a lease early are varied depending on wether it was a business leasing contract or a personal leasing contract. But in both cases, the implications arent great.

Business Leasing Contract

Normally speaking we are talking about contract hire. Basically the contract hire company can charge what they like. But the general rule of thumb is 50% of the remaining payments, so if your payment is £200 per month and you have 10 months to run, expect to pay £1000 return fee. Dont forget that you will still have to pay for anything that isnt deemed fair wear and tear.

Personal Leasing Contract

If the contract you have is PCH, please refer to the answer above, however if your contract is PCP or HP - stop now!. With a regulated hire purchase agreement (such as HP or PCP), returning the vehicle early is commonly knows as Voluntary Termination and finance companies take a very dim view on it.

Yes, it is your consumer right once 50% of the contract is paid to return the vehicle without penalty, but just you try to get a loan or credit card afterwards - no chance.

I have worked in a sub prime department, and usually VT (Voluntary Termination) cases go nowhere, even when CCJ cases can be placed.

So (and this is very important) if you are considering sending your lease car back early - make sure you get the right advice first, otherwise you could be paying for it next time you want a mortgage or loan.

GENERAL INFORMATION

PERSONAL CONTRACT PURCHASE (PCP) was designed specifically to be a personal contract for private individuals. By entering into a PCP plan, which is classed as a conditional sale agreement, it offers you protection under the Consumer Credit Act 1974 and the Financial Services Regulations 2004.

Seen as a way to avoid the depreciation trap, a PCP agreement allows you the option to set up a contract term, with monthly payments. At the end of the term, you then have the option to purchase the vehicle, or simply hand it back to the contract provider. The Title of the vehicle does not change until the final ‘baloon’ payment is made.

IMPORTANT INFORMATION

You should receive the log book for your vehicle within six months of the delivery date. It is therefore your responsibility to tax the vehicle when it next becomes due .

 Your car is covered by the usual manufacturers warrantee, and can be taken to any dealer should you have any issues with manufacture of your vehicle.

What Happens if I do not receive my log book? 

You should contact the supplier to request it to be sent on to yourself, if your Road tax is due soon or you have been unable to obtain the log book you should apply to the DVLA for a V62 form. This will allow you to transfer the log book into your own name and enable you to tax your car. There is a charge of around £25 for this but its still cheaper than the fine for driving with no tax! It is also worth taking into account that this can take up to six weeks to complete so make sure you allow pleanty of time before your tax is due to expire.

The best way of answering this one is as follows:

The maintenance contract will usually cover anything that warranty and insurance dont, which can be catagorised into the following

• Routine Maintenance and Servicing
• Reasonable Replacement of Tyres due to wear and tear

And sometimes a form of fleet managment system. The common misconception among leasee’s is that the contract will continue to cover replacement tyres for punctures,etc. This is not the case. The maintenance company will normally allow for replacement tyres for every 15,000 miles or so throughout the contract.

This is quite a difficult question to answer, nominally because there are different contracts available to companies in the uk, so for this article we will deal just with the most popular company car leasing option - Contract Hire

Contract Hire is essentially a hire contract similar to that you would get from any rental company, it just has a longer fixed term and fixed mileage.

First of all lets deal with the term element. The term can range from 3 months upto 5 years, but realisticly, the best deals are to be had over a 2 or 3 year period.

Mileage - always a sticking point for most businesses so let me answer the main queries first:

No you are not limited to 10,000 miles per annum. You choose the mileage up front (anything upto 70,000 miles per year) and then the rental is calculated accordingly.

No you will not pay £1 per mile excess mileage. And if you do - dont bloody sign the contract!! The avergae excess mileage rate is in the region of £0.04p - £0.12p per mile.

Off sheet accounting, is one of the prominent reasons why companies would opt for Contract Hire. Dont worry, you dont need to be an accountant to understand this, and I will keep it simple.

If you purchase an asset (such as a desk or car or building), the value of that asset is placed on the balance sheet of a company and depreciated annually by your acountant. As such you pay tax on this value placed. Not always good for alot of people. The benefit would be that your balance sheet looks better.

When you lease an asset, there is no entry in the balance sheet (because you dont own it) so the payment (or 90% of it in the case of Contract Hire) is the effectivley ‘lost’ in the profit and loss account (meaning no tax on the payment)

So basically, for cars you can ‘write off’ 90% of the payment against each monthly profit and loss account and for vans and commercial vehicles its 100%

VAT - Another handy one. Cars first:

50% of the VAT payable on a Contract Hire agreement can be reclaimed, positivley affecting cashflow (as you are only paying VAT on the payment instead of the whole vehicle).

On the maintenance element of the contract, 100% of the VAT can be reclaimed. Which is nice

Next vans and commercial vehicles.

100% of the VAT can be reclaimed on the van or commercial, and 100% on the maintenance as such.

Road Fund Licence - Is covered in a contract hire agreement throughout, you dont have to worry.

Initial Capital Outlay - Is usually restricted to the equivalent of 3 monthly payments, but in some cases (and multiple orders) can be reduced to monthly in advance.

There is my bried overview of contract hire for businesses, please,please,please do not hesitate to ask if you have any questions. I am more than willing to help

Take care for now.