Personal Car Leasing – Is it Necessary?

Car leasing is fast becoming the preferred option of many individuals these days. The reason behind this new trend is that it is less expensive to lease a vehicle than to own one. Leasing a vehicle is less risky to an individual because the leasing company becomes responsible for the upkeep and other related financial costs. It’s beneficial for the Lessee because all that is necessary is that the Lessee pays the initial installment with an agreement to pay the monthly payments and returning the car when the lease comes to an end.

In addition, car leasing is different from purchasing; depreciation, finance packages and costly loans are not your responsibilities, so too are repair costs which were unexpected. You also get the chance to drive the newest models, and your lease agreement may include coverage on servicing and repair costs inclusive of tires.

There are two main options available to private customers from ; Personal Contract Purchase (PCP) and Person Contract Hire (PCH).

Personal Contract Hire

Personal Contract Hire is a leasing agreement between a car leasing company and an individual. With this option, the agreement stipulates that you get to use the car for a specific time period and this includes mileage at a specified monthly fee.

When the leasing period expires, and you return the car, you can sign a new contract on a new car without having the trouble of finding someone to buy the old car. The leasing company will pick up these charges. Your main concern, when you return your vehicle would be if there are damages, such as scratches and other faults, or if you exceeded the mileage agreed upon as stated in the agreement. If this is the case, then of course, you are liable for these damages which occurred while you had the vehicle.

An added advantage of a PCH contract is that the yearly road fund license is a part deal. This contract can also carry a maintenance component which takes care of all servicing and repair costs; all at a fixed monthly fee.

Personal Contract Purchase

In a Personal Contract Purchase agreement, an individual is allowed a car on fixed monthly payments for a fixed period, which is normally 2-3 years with the mileage included. How does the Lessee benefit from this? The major benefit is that you have the choice of either buying the vehicle or returning it to the leasing company.

If you decide that you want to purchase the car, then you’ll be required to make a closing payment which is referred to as ‘balloon payment’. This is not something new, because the amount was specified in the original leasing agreement. The ‘balloon payment’ is equal to the Residual Value of the vehicle at the time the contract ends.

Like the PCH, the PCP also carries a maintenance feature whereby all servicing and repair costs are preset at a fixed monthly fee.

There are many advantages to gain when you lease a car; driving a newer model vehicle, no additional costs for average wear and tear on the vehicle, and others. So if you need a car without the usual hassle that comes with purchasing one, why not choose to lease? There are some great benefits to reap.