New to car leasing and don’t know your contract hire from your hire purchase? Not sure what ‘including maintenance’ means? Perhaps you’ve heard how most vehicle owners in the UK are now choosing to lease a car, over buying one, but not sure exactly how it works yet?
Many customers call or email us to ask all about car leasing and what type of lease would be best for them. Although leasing is definitely a personal choice, when it comes to choosing what agreement is right for your financial situation, we wanted to go over the general procedures of car leasing; and how it works with us here at Hippo Leasing.
WHAT IS LEASING?
Leasing, in very general terms, is paying a pre-arranged monthly fee for a brand new, or nearly new car, rather than paying the full amount of the vehicle upfront. Leasing allows customers to drive a car they couldn’t necessarily afford to pay for upfront and either; pay the full amount over a set number of months / years until they own it, or pay a monthly fee to rent / hire it, giving it back at the end of the term. These two options can also be combined so that customers can choose to buy, swap or simply walk away at the end of their chosen lease term. Often, there is an initial deposit to be paid at the beginning of the term. However, we have many deals that do not require a deposit at all too. Some leases can include maintenance of the vehicle, warranty, road tax, roadside assistance and, in some cases, also insurance. Car leases can be completely tailored to your individual and financial needs.
How are leasing deals structured?
We’ve rounded up the 4 most popular car leases;
PCP – PERSONAL CONTRACT PURCHASE
A very popular and simple choice; PCP allows drivers to choose a car, pay a deposit (if any),agree on a monthly fee, and then drive it away.
Monthly payments on a PCP plan are often the lowest as, unlike other leases, the monthly costs do not contribute to the total price of the vehicle. Rather, they cover the depreciation of the vehicle over the lease length, and then conclude with a balloon payment at the end. This simply means you’ll be repaying the difference between what the car is worth at the start of the lease and what the dealer thinks it will be worth at the end of the lease (the Guaranteed Minimum Future Value).
When the PCP contract ends?
Return the car – no strings attached or extra charges. As long as the vehicle is returned within the agreed mileage and wear and tear guidelines you can either choose another car and another lease, or simply walk away completely.
Buy the car – as long as you pay the final payment that you initially agreed when taking out the lease, known as a balloon payment (future value figure),then the car is legally yours to drive away and take full ownership of
Part exchange for a new car
Benefits of PCP:
If your car is worth more than the Guaranteed Minimum Future Value that you agreed initially, the difference can go towards a deposit on a new car
Monthly payments are usually lower than if the car is financed by Hire Purchase agreement
Hassle free - you can return the car without worrying about selling it on at the end of the term
PCH – PERSONAL CONTRACT HIRE
PCH, again, allows drivers to choose a car, pay a deposit (usually higher than PCP, but we do also offer no deposit deals),agree on a fixed monthly fee and timeframe, and then drive it away.
When the PCH contract ends?
Return the car - no strings attached or extra charges. As long as the vehicle is returned within the agreed mileage and wear and tear guidelines you can either choose another car and another lease, or simply walk away completely.
You will never be the registered keeper of the car.
Mileage and wear and tear guidelines will be stated in the contract. (Note: Excess mileage and damage to the vehicle will result in additional charges.)
Benefits of PCH:
You will have access to cars you may not have been able to afford to buy outright
No worries about depreciation and reselling
You can simply take out another lease at the end of your term, meaning you always get to drive the newest, and most up-to-date car models
HP - HIRE PURCHASE
With Hire Purchase, or HP, any initial deposit you decide to pay and monthly payments will all go towards paying off the entire cost of the car.
When the HP contract ends?
Own the vehicle - The car is yours and you take full ownership
Benefits of HP:
No additional charges for mileage or damage
Own a car you may not have been able to afford to buy outright
You can save money by paying off your unpaid instalments early
LP - LEASE PURCHASE
A Lease Purchase agreement is very similar to a PCP agreement, whereby the monthly payments cover the difference between the value of the car at the start and end of the agreement. However, the main difference between LP and PCP is that the balloon payment at the end is compulsory, and you will definitely take ownership of the car at the end of the lease term.
When the LP contract ends?
Own the vehicle – the balloon payment is paid and the car is yours to own
Part exchange - pay off the balloon payment then part exchange it towards the lease of a newer car
Benefits of LP:
Lower monthly payments than if you opted for HP
You can settle your agreement early by paying off outstanding payments
Where to? - With Hippo, your new lease car can be delivered to an address of your choice, on a day that’s suitable for you, anywhere in the UK, Northern Ireland and The Isle of Man.
Is it free? - Brand new cars all come with free delivery. Our approved used lease cars will come with a competitive delivery charge, which is calculated by our logistics department, depending where you live in the UK. The closer you are to us, the cheaper it will be.
The Delivery - New cars will be delivered by the manufacturer, rather than us here at Hippo, as they are producing the car for you. Our used approved vehicles and cars in stock will be delivered by us.
All our drivers are fully insured and extremely experienced, and your car will arrive at an arranged address of your choice, valeted, with all the paperwork and ready to drive.
Please note that upon collection / delivery of your vehicle you will need to provide us with a proof of identification, such as a driving licence or passport. This is just a final check, to ensure that we deliver the vehicle to the agreement holder. Our drivers display the controls for you also, so it is vital that you are on hand.
Timeframes - Delivery will take up to just 10 days from the minute you are accepted, depending whether your car is in stock. New cars can take up to 6 months to deliver, as this is dependent upon the manufacturer. It will be confirmed when ordering your new lease car.
We offer vehicle warranty, for free. The length of warranty depends on whether it’s a brand new car, or an approved used.
Everyone receives three months comprehensive warranty when you first get a car from us. You will also have warranty dependent upon the manufacturer of your vehicle, for example; Kia offer 7 years warranty and Toyota offer 5 years warranty. Check with your manufacturer’s guidelines to know if you have warranty.
Tyres & Brakes covered? – Warranty covers issues caused by physically broken or permanent electrical defaults that are beyond your own control. Brakes and tyres are covered by wear and tear guidelines and are usually paid by the customer.
There’s no need to pay for successful warranty claims, and then claim back them back. We will pay your chosen garage directly for the authorised sum with our debit cards over the phone. If the garage does not accept card payments, we will pay immediately by bank transfer. You can then collect your car.
If you are experiencing any problems and have a warranty claim, then you must contact Driver Car Warranty. Alternatively, providing the vehicle is still under manufacturers warranty, you can visit your main dealer.
Maintenance packages will vary from car to car and different lease deals; some come with maintenance included and others come with optional maintenance packages at an additional fixed monthly cost. They can be tailored to your contract length and agreed mileage and are available for both business and personal users.
Maintenance packages will often cover such things as servicing, replacement tyres and other consumable parts. Although, again, each deal will vary so please check if its included and what it covers with your leasing advisor.
All new cars come with the option to add a nationwide maintenance package. What’s included will depend on what car or deal you’ve chosen.
Ordinarily, leasing companies do not offer maintenance packages on used cars. However, here at Hippo, we have our own preparation garage so, if you live locally to Blackburn, you’ll be able to add a maintenance package onto your used lease car too.
For the low cost of adding a maintenance package, we feel it’s worth it for the peace of mind it will bring to you. You won’t have to deal with unexpected bills and it, therefore, lowers the overall running costs associated with your vehicle.
Brand new cars come with tax, for the period of your agreement.
Road tax will often be included, for free, on most of our new car deals
Our used lease vehicles do not come with tax due to the changes in tax laws made by the Government in October 2015.
Used car’s tax will be the responsibility of the new keeper
New cars do not require an MOT for the first three years of their life.
If it is beyond three years old when we deliver the vehicle it will either have more than 6 months remaining, therefore we won't have carried out an additional MOT. Otherwise, it will come with a brand new 12 months MOT.
It is your responsibility for the servicing and MOT of your vehicle. An MOT must be conducted annually on all cars older than 3 years. For servicing, please check the manufacturer's guidelines so you are aware when the car needs to be taken in for a service.
You are able to take your car to a garage of your choice, as long as it is VAT registered.
If you live in the Lancashire area, you can bring your car into our state of the art preparation centre and body shop based in Blackburn for servicing, repairs and MOT.
We do not, ordinarily, offer insurance on any of our lease deals. This is due to the fact that insurance is an extremely personalised assessment and therefore price. From no claims discounts, to age, to gender; we just wouldn’t be able to offer a universal price that would work for all customers. It would potentially end up being more expensive than getting insurance for yourself.
Sometimes, albeit rarely, we do come up with deals that can include insurance. These would often be for a certain age category, like new drivers/ first car leasers, so we could offer insurance that would work for all.
It is a requirement that every customer that wants to lease with us, and all other car leasing companies, go through a credit check.
All leasing and finance agreements require credit checks for our staff to find the right lender who will accept you or your business.
If you are worried you will not be accepted due to poor or bad credit, we do specialise in bad credit car leasing offers on a variety of vehicles.
If you are not accepted by another car leasing company, do give us a try. We have an extremely high acceptance and approval rate
PROS OF CAR LEASING
Most people these days lease their cars, and here are a few reasons why;
Able to drive a car they couldn’t usually buy outright, no huge upfront sums
Leases often come with no deposits too
Easily order it all online / over the phone. No need to go anywhere, simply choose and order your car, and it’ll be delivered to you, anywhere in the UK
Able to drive a new car every few years – keeping up with new safety, electrical and entertainment features.
No need to worry about maintenance or servicing or MOT of a vehicle. It’s all taken care of for you.
Just pay one low monthly fee, for the car, road tax, roadside assistance. No separate bills.
New cars will be covered by manufacturer’s warranty and may include free oil changing and other scheduled maintenance.
You don’t have to worry about the car value depreciation, or ever having to sell it on.
As a business owner and lease owner of the vehicle you’ll save money on tax.
At the end of the term, you can just give the car back with no strings attached or debt to pay.
CONS OF CAR LEASING?
As with any contract, if you break it, there are penalties. It is just the same with car leasing. Stick to the agreement and it’ll be fine, break it and it will end up costing you more than originally planned.
Overall, leasing can sometimes cost you more than an equivalent loan because you are always driving a rapidly depreciating asset.
Leasing car after car will mean monthly payments to no end. Buying, or lease purchasing, will allow those payments to stop and you get a car at the end of it. On the flipside of this, you do have to deal with maintenance costs of that car as it gets older, as well as not being able to drive a new car every few years. So it can all be relative.
Mileage – You pre-agree your mileage as you sign your lease deal. If you go over the contracted amount you will be charged, per mile. On the contrast, you will not get any unspent miles back.
It’s best to be sure that you can afford and adhere to the terms of the lease. If for some reason you need to exit the lease before the agreed end date, there will be added fees and penalties that could be extremely costly, especially on an expensive car.
You are unable to make changes to the vehicle such as adding tinted windows, alloys and body kits.
It must arrive back in a good condition with no damage, inside and out, apart from general wear and tear. If there are big scratches, dents or alterations you, again, will be charged.