Personal contract hire, as the name suggests, is essentially the same as contract hire, but for the private individual. Personal contract hire is ideal for the individual who wants fixed cost motoring, or who is opting out of a company car scheme and receiving a monthly car allowance.

The main features of personal contract hire include:

• A Hiring Agreement where the vehicle remains the property of the Finance Company
• The vehicle is disposed of by the Finance Company at the end of the contract
• The contract is set for a period usually between 2 and 5 years (although this is amendable)
• The contract is for a set mileage, usually for a maximum mileage of 100,000 for petrol engines and 120,000 for diesel engines

As the customer, you’ll pay a fixed monthly rate which is calculated based on the cost of vehicle funding, the cost of vehicle depreciation and the road tax. The big advantage of personal contract hire is that you get all the benefits of having a vehicle without any of the risks typically associated with owning one. You only have to bear the direct costs for fuel and vehicle insurance, as everything else is included in the monthly rental or taken care of by the leasing company. The only other way you would have to pay more is if you exceed the terminal mileage figure, you’ll have to pay excess mileage charges.

Other advantages of personal contract hire include:

• Sourcing and administration handled for you
• No responsibility for vehicle disposal
• Low initial outlay
• Low monthly outlay

VAT is built into the monthly payments, but is not reclaimable by private individuals. Maintenance packages are usually available so that you don't get any nasty surprises.

Whether you are buying a new car as a business owner or a private individual, it is an expensive business and that is one of the reasons why people choose not to do it in the end. Another reason is that vehicles devalue from the moment they are driven, so, unlike a house, your car won’t be worth any more when you’ve finished with it. With personal contract hire, you don’t have to worry about that, as you don’t own the car, you are just paying a monthly rental.

UKVF is a privately owned vehicle finance and vehicle sourcing company. We have over 15 years’ experience in the industry. Give us a call today on 01257 267 036 for a free personal contract hire quote.