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Hugo Hippo’s Guide To Car Leasing

Last Updated: 9th Dec 2016
Hugo Hippo’s Guide To Car Leasing

9th December 2016

When it comes to acquiring a new car, we all must consider how we are going to budget for the cost. More and more of us are having to pay monthly to afford a new car rather than being able to buy one outright. One way to do just that is through car leasing and it is something you could consider like millions of others.

What is car leasing?

The basic definition of car leasing is that you choose a car, drive it for a few years depending upon your agreement and then hand it back without having to worry about resale costs. You simply pay a low monthly cost and you can repeat the same process every time you hand the car back.

You can think of car leasing as long term rental of your chosen car. You can get a car on a personal car leasing agreement or you can get one or a fleet of cars on a business car leasing agreement. It all depends upon what you need the car for.

What is the difference between personal car leasing and business car leasing?

The truth is that there isn’t much of a difference between personal and business car leasing except the intent behind it. Personal or private car leasing is for your own personal use, which is what the majority of people who lease cars sign up for.

At the beginning of the agreement, you estimate how many miles you will do per year (similarly to what you do when you insure your car) and there are additional costs if you go over your agreed mileage for each year of the agreement if on contract hire.

There are two main types of personal car leasing and they are personal contract hire (PCH) and personal contract purchase (PCP).

Personal Contract Hire

Personal contract hire is one of the most popular ways to lease a car because it doesn’t require you to buy the car at the end or worry about the vehicle's depreciation. With PCH you take control of the car and use it for an agreed period of time and number of miles.

To get a PCH agreement, you choose the car you want and agree to pay a low monthly amount, but it does usually require a more substantial deposit than a PCP agreement.

There is a catch all this and that is that you will not be the legal owner of the car. The dealership from who you got the car from will be the legal owner, with the flip side being that you don’t have to pay tax on the vehicle. However, because you are not the legal owner of the car, you have only one option at the end of the agreement, which is to hand the car back to the dealership. You do not have to option of buying the car at the end and if you wish to upgrade to a newer vehicle, you will be required to start a new PCH agreement.

The Benefits of PCH

Fixed Monthly Payments

Deposit are negotiable

No depreciation worries

Road Tax included

Low costs mean access to better cars

Optional Maintenance

Personal Contract Purchase

Personal Contract Purchase is a little less like a leasing deal and more like a standard motor loan. It works very much the same as a PCH agreement, however, it has more options of what to do at the end of the agreement. You do still have to pay a deposit; however, the deposit is usually lower than a PCH deposit. You also still get the benefits of low monthly payments, allowing you stretch your budget to afford a better car.

At the end of the PCP deal you have three options. First, like the PCH deals, you can simply hand the car back when your agreement is over. The next option is that you can part exchange it in as part of an upgrade agreement to get a newer car.  The final option is that you can pay a balloon payment at the end of the agreement and purchase the car. Because you have the possibility of paying off for full ownership of the car at the end, you are the legal owner of the car as soon as you receive it.

The benefits of PCP

Range of options at the end of the agreement

Fixed monthly payments

Flexible deposits starting from zero deposit

Lower monthly costs compared to buying the car

For your business

Businesses have an image and a brand to maintain. Business car leasing allows you to get any number of cars, whether it be a solo vehicle or a fleet of vans, for your business. This can be perfect for those wanting to develop a professional looking brand for their business. Business car leasing is the most common way for businesses to acquire company cars because they always have that option to simply hand them back and upgrade

In a similar way to personal car leasing, businesses pay an upfront deposit, followed by low monthly costs for each vehicle. Whilst you can get a fleet of vehicles, you pay for each on under their own contract.

Business Contract Hire

Registered businesses that have been operating for a set period of time are able to lease either an individual or fleet of cars on a BCH agreement. Different leasing companies have different time requirements for how long business should have been operating for before they can lease. On a business contract hire agreement, the business is not the legal owner of the cars and therefore you do not need to tax the vehicles.

If you are leasing a fleet of vehicles, you must estimate the annual mileage of each vehicle individually rather than as a fleet. Once the mileage has been decided and the deposit has been paid, you simply pay the low monthly costs for the rest of the agreement. However, if you go over the agreed mileage in any of the years, you may have to pay additional costs. At the end of the agreement, you simply hand the cars back.

Benefits of BCH

Optional maintenance

Fixed monthly payments

VAT Benefits -  50% of your VAT on BCH payments

Business Contract Purchase

For businesses looking at a business contract purchase agreement, you will be required to pay an upfront deposit (that could be lower than the BCH deposit) followed by an agreed period of low monthly payments. The monthly payments are minus the estimated future value of the car also. At the end of the agreement there will be a balloon payment that represents the cars future value, which is based on what the lease company deems the minimum value of the car after the agreed period.

Like the PCP agreement, a business contract purchase comes with three options at the end. You can pay off the balloon payment and own the vehicles. You can part exchange the cars in to upgrade to newer models. Finally, if you do not wish to own the cars or upgrade, you can simply just hand the cars back providing you haven’t exceeded the agreed mileage  and are within the wear and tear guidelines.

Benefits of BCP

More options at the end than BCH

Low or no deposit

Fixed monthly payments

Lower payments than buying outright

No depreciation worries

Contract Lengths Optional from 24-60 months

 

Can I get no deposit car leasing?

Yes. It is possible to get a car leasing deal for either personal or business without having to pay a deposit. The main different between a normal car leasing agreement and a no deposit agreement is that the monthly payments are likely to be a bit higher because you haven’t paid that deposit.

We understand that the deposit is one of the main reasons people do not sign up to car leasing deals, which is why we offer some of the best no deposit car leasing deals on the market.

Can I lease a car with bad credit?

It is possible to get a car on lease if you have bad credit. A team of underwriters will conduct a credit check on you to see how good or bad your credit is and your account manager will work with lenders to see which lender has the best deal for you.  

There are two very important aspects you must be able to prove before you will be accepted for a bad credit car leasing agreement. First, you must be back in control of your finances. This means that you are not accumulating more debt and are on your way to paying off that debt as well as trying to improve your credit.

The second thing is that you must be able to afford it in the long term. If you are attempting to pay off debt and that is what takes the majority of your money away, it is not a good idea to embark upon a bad credit agreement that could spoil that. No one can predict the future, so if you are not completely certain you can afford it, then you should not consider a bad credit car lease.

We check your credit through credit reference agencies and their records of your financial agreements include the following:

Account balances for those agreements

Defaulted accounts

CCJs

Bankruptcies

Voluntary arrangements (IVAs)

Addresses, and aliases, you have registered.

How do I lease a car?

Leasing a car has never been easier. All you need to do is check out our website and see if we have of a car you want in stock. Don’t worry if you cannot find a car on our site, do not worry because we can source any make and model from 2011 onwards.

If you do find a car on our site or know what car you would like us to source, simply submit an enquiry to us. You can do this either through our enquiry form or by speaking to someone on live chat. If you wish to go straight to an account manager, simply give us a call on 01254956666 and you will be put through to the correct department.

Our specialist account managers will walk you through every stage of the process so that you are constantly informed and aware of what is happening with your enquiry. The final part of the process is for you to read and sign your documents and your lease car, if a used, in stock vehicle, will be delivered to you within 10 days. If you are going to a brand-new car, the wait can be a little longer.   

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