What is Personal Contract Hire?
Personal Contract Hire is a long term method of hiring a brand new car for between 12 and 60 months. Instead of paying for a car in full or getting a loan you pay fixed monthly rentals based on the value of the car, your annual mileage, contract length and the expected end value (Residual Value). You essentially pay the difference between the cost of the car and what it will be worth when you have finished with it.
At the end of the contract the car is collected from you and there are no charges so long as it is not over your specified mileage and it is not damaged more than outlined in your agreement’s fair wear and tear policy.
Key points of Personal Contract Hire
- Contracts range between 12 and 60 months
- Initial payment is low and can be increased to lower the fixed monthly payments
- Your monthly rentals are fixed and would only change if the VAT rate is revised
- You state your average yearly mileage at the start of the agreement and this is used to calculate how much your rentals will be
- You choose how long the contract is and can take a choice of any new car. At the end of an agreement you can get a new car or simply walk away
- Tax is included for the duration of the agreement
- Maintenance can be included in the monthly rentals which covers all servicing and tyre replacements in most cases
Things to consider with Personal Contract Hire
- You do not own the car for the duration of the agreement
- If the car is over mileage you will be charged excess pence per mile which will have been outlined to you before the agreement
- Any damage which is above and beyond the fair wear & tear policy will be charged to you after handing back the car
- If the VAT rate changes this will reflect in the monthly rentals