It can be hard to understand the different types of leasing options available to you if you are new to the leasing market. This guide will provide you with the vital information about our leasing products, helping you to compare car leasing options.
The leasing options are split into two different types, business and personal. With all leasing contracts you will be required to pay an agreed advanced rental (deposit), the more you pay up front, the lower the monthly cost will be. Your contract will be over a set period, typically 24, 36 or 48 months and you will be tied into a fixed contract for the duration of this period with a set monthly price.
The following descriptions explain the differences between the types of leasing contracts, providing you with an overview to compare the best car leasing options:
Business Contract Purchase
Business Contract Purchase allows a business to lease a car over the contract period but must then purchase it at the end of the contract. Confusingly, this is a very similar product to lease purchase and many lenders will refer to it as either of the two names. Either way, it does not change the fact that you will be required to purchase the car at the end of the agreement at the price which is set at the beginning of the contact based on the residual value.
Read more information on Business Contract Purchase
Business Contract Hire
Business contract hire allows businesses to lease a vehicle but will not give them the option to buy it at the end of the contact. This allows a company to remove the financial worry of finding large sums of money to purchase the vehicle at the end of the agreement. Instead, they can hand the car back and lease another brand new vehicle.
Personal contract purchase is also referred to as PCP. PCP provides an individual with the option to purchase their leased vehicle at the end of the contract. They will be offered the chance to purchase the car at a price that is agreed at the beginning of the contract. The individual can choose to purchase the car, or leave it and find an alternative arrangement.
Personal Contract Hire is often referred to as PCH. PCH is a type of contract hire for an individual that wants to lease a vehicle over a set period of time but does not want the option to purchase the vehicle at the end of the contract. In this instance, the individual will simply hand the car back at the end of the contract.
This is one of the most commonly used phrases for contract hire and leasing. If you take a lease purchase contract you are required to buy the vehicle at the end of the contract at the agreed price. The contract will run as any other leasing contract until the final payment when you will be expected to settle the purchase price of the vehicle.
Read more information on Lease Purchase
This is also known as HP. Hire Purchase isn’t actually a type of leasing as you do not lease the vehicle at any point. Instead you borrow the money from a lender who will buy the vehicle outright from a dealership. You will be the registered owner of the vehicle, and unlike contract hire agreements, your name will be listed on the V5 as the owner of the vehicle.
If you buy a car using Hire Purchase your monthly payments will be higher than if you lease the vehicle. This is because at the end of the loan you will not need to pay a settlement or balloon payment to take ownership of the vehicle. You will also not have the option to return the vehicle as you will be the owner.