The world of car leasing can be a minefield if you are new to the topic. There are a number of questions that you will undoubtedly be seeking answers to from payment structures to the models of cars available.
Depending on your reasoning to lease, a great starting point is to understand the types of car leases to consider. Once you gain a better understanding of the different types of car leases, you will have a clearer idea of which is suitable for you.
Table of Contents
- The two types of leases to consider
- Why consider personal contract hire (PCH)?
- Lower monthly payments
- Access to the newest cars
- Hassle-free motoring
- Avoid depreciation risk
- Accessibility to electric vehicles (EVs)
- Why consider business contract hire (BCH)?
- Increased tax efficiency
- Improved cash flow
- Avoid asset depreciation
- Leasing company can take the pressure away
- Drive new, efficient vehicles
- Find out more about leasing a vehicle
- Let our experts guide you through the types of car lease
Our insightful article details:
- The two types of car leases
- Why consider personal contract hire leases
- Why consider business contract hire leases
- How Motorfinity can support you
The two types of car leases to consider
When looking into the different types of car leasing, you’ll be happy to hear that there are two simple options: personal contract hire (PCH) or business contract hire (BCH). And as their titles suggest, these are for either personal or business use.
Let us delve into these types of car lease further:
- Personal contract hire (PCH) – this is an option that allows an individual to lease a new car over a long-term period (typically 2-5 years). During this time, you pay an initial deposit followed by a set of fixed monthly payments. This contract will include agreements such as a mileage limit and fair wear and tear terms, while the car must also be returned at the end of the lease. Once returned, you will have the option to lease a new vehicle if you wish.
- Business contract hire (BCH) – this is an option that allows a business to lease a new car or van over a long-term period (typically 2-5 years). The company will pay an initial rental followed by fixed monthly payments for the duration of the lease. Like a personal contract hire, the company will be required to adhere to mileage limits and fair wear and tear terms. Again, the vehicle must be returned at the end of the lease and will have the option to lease a new vehicle.
Why consider personal contract hire (PCH)?
When considering the types of car lease agreements, a personal contract hire is a great option for someone who is looking to drive a new car for personal use. This option can therefore offer a number of fantastic benefits for someone who is looking for a flexible approach.
These include the below.
Lower monthly payments
A PCH lease can be an affordable option as opposed to paying finance or buying a car outright. With leasing, you will only be paying for the car’s depreciation, meaning that the monthly payments are typically lower.
Are you looking for an example?
Let’s say that you’re leasing a Volkswagen Tiguan Estate that is valued at £35,000. The lease could cost around £350/month, whereas it could be in the ballpark of £550/month if you was to purchase it via finance.
For someone who is opting for a flexible approach, a personal contract hire is a no-brainer!
Access to the newest cars
With a personal contract hire, you have the luxury of gaining access to the newest cars! Due to the lease payments being lower than purchase agreements, it’s more affordable for you to drive newer, high-spec models.
And the best part? Once your lease ends, you can begin a new PCH to drive the latest car, meaning you can enjoy:
- The latest tech and safety features
- Improved fuel efficiency
- Manufacturer warranty coverage
Hassle-free motoring
Opting for a PCH can introduce you to a flexible, hassle-free approach to motoring. Leasing can make your motoring life easier in terms of budgeting and overall convenience by:
- Providing fixed costs – that offer consistent outgoings
- Removing resale stress – as you simply return the car rather than trying to sell at a good price
- Providing optional maintenance options – such as servicing and breakdown cover, leaving one less thing for you to worry about!
Avoid depreciation risk
There’s an old saying that you lose money the moment you drive your new car out of a dealership.
Although slightly extreme, the premise is correct – cars lose value quickly. In fact, according to RAC, it is estimated that an average vehicle’s value drops by 50-60% within its first three years.
If you was to opt for a personal contract hire, you do not own the car. In other words, the car’s depreciation is solely the leasing company’s headache, not yours!
Accessibility to electric vehicles (EVs)
While electric vehicles certainly have their benefits, there’s no secret that they are expensive to purchase.
EVs are a popular option for those opting for a PCH – and that’s because this payment type makes it affordable.
This is a win-win, particularly for first-time drivers of an EV, as it:
- Allows you to try an electric car without the risk of long-term ownership
- Allows you to lease a new EV at the end of our PCH
Why consider business contract hire (BCH)?
If you are looking for a lease for business purposes rather than personal, then a business contract hire (BCH) is what you’re looking for. This is a great option for a company who is looking to use the newest cars and vans without the commitment of owning the vehicle(s). Above all, it allows you to drive vehicles that provide both reliability and prestige to your business.
We outline further benefits below.
Increased tax efficiency
Choosing a business contract hire can essentially reduce your overall cost of running company vehicles. This is largely due to tax efficiency, as you’re able to:
- Reclaim 100% of the VAT on vans or cars used solely for business
- Treat lease payments as a tax-deductible business expense (depending on C02 emissions and use)
Improved cash flow
All businesses are reliant on healthy cashflow. And by using vehicles with a BCH, it will help to facilitate this as it ensures:
- Avoidance of a large upfront purchase
- Predictable, fixed monthly costs that make budgeting easier
- Money can be spent on other key areas of the business
Avoid asset depreciation
With vehicles rapidly depreciating, your company can potentially take a financial hit in terms of resale values. A BCH ensures that you avoid this obstacle as the leasing company owns the vehicle(s), meaning that the resale value is their responsibility, not yours.
Leasing company can take the pressure away
Owning a business vehicle can cause potential headaches – both in terms of finances and administration.
This pressure can be eased by opting for a business contract hire as your leasing company will take on much of the burden. This is especially the case with areas such as:
- Organising registration, delivery, and disposal of the vehicle(s)
- Organising actions included in any optional maintenance packages such as servicing and breakdown cover
In terms of budgeting, you will know exactly where you stand as your monthly invoice will cover all your costs!
Drive new, efficient vehicles
Above all, a business contract hire enables your company to drive the newest vehicles on the market. This has great benefits, including:
- Access to vehicles with better safety, tech, and fuel economy
- New cars supporting your business to reduce emissions and meet sustainability goals
- Easier transition to electric vehicles (EVs) – due to the affordable payment structure
By using the newest vehicles, it looks outstanding at face value and will only support to strengthen your brand over the long term!
Find out more about leasing a vehicle
Are you looking for more information about leasing a vehicle? Check out our insightful articles to find the answers to your questions around:
- How the car leasing process works
- The benefits of leasing a car
- Why you should consider leasing rather than purchasing
- Cars you should consider for your leasing budget
Let our experts guide you through the types of car lease
Now that you have a clearer understanding of the types of car leases available to you, maybe you’d like to discuss their respective details further?
Our knowledgeable team are eager to hear from you and answer your questions.
Speak to a member of our team todayRelated Car Reviews and Articles
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