Personal Car Leasing Options

Leasing Options for personal customers too

When you take a vehicle on contract hire, the vehicle is bought by the funder.  The vehicle is then registered to them – a business, meaning that they can reclaim tax relief from HMRC by using the write down rule.  They also purchase the vehicle at a heavily reduced rate, they receive far more discount and favourable terms with buying so many vehicles from the manufacturer.  Businesses have been choosing the business car leasing for years, as it frees up their capital.  We're seeing a massive increase in personal lease deals.  I often come across the argument of “but you never own the car, why would you pay so much for a car that you don’t own?”  To say this comment is green is an understatement.  If you read the terms and conditions of a finance agreement – many, don’t they just skip past the repayment and APR part and go straight to the signature part excitedly.  Well, if you did read the terms and conditions, you’d see that until you pay the final payment on a Hire agreement that you don’t legally own the vehicle despite the logbook being in your name.  If you’ve ever watched programmes with bailiffs such as pay now or we’ll take it away, you’ll have heard them say on several occasions that an invoice proves proof of ownership and not the logbook.  Anyway, my point being is that have they ever owned any car that they’ve bought via a finance agreement?  Most people will take a hire agreement over 5 years or a PCP over 3 with the balloon at the end still to pay.  Who has kept their car past the point of finance being owned and if so at that point, it’s now an old car out of warranty that is usually starting to cost more from a maintenance perspective?  You’ve usually paid at least £80 plus more per month for the logbook, to be in your name?!  Okay, so you may ask whys such a difference, well; there’s several reasons.  Firstly, you buy a vehicle as an individual so pay the VAT levy at the prevailing rate, which is currently 20%.  Whereas the funder (a business that is VAT registered), uses the write-down rule each year to minimise taxation and then at the end of the contract sell the vehicle as VAT qualifying to a Dealership or via an Auction.  The funder also purchases the vehicle for much less than a consumer would who purchases one vehicle every few years.  Your contract hire rental is calculated using the purchase price of the vehicle and the expected resale value of the vehicle at the end of the contract.  You just pay the part in between.  Whilst you’d like to believe that if you purchase a vehicle via PCP or HP that you’d have a little equity in the vehicle after 3 or 4 years, have you ever known anyone make money from a depreciating asset other than a Dealership?

Personal car on lease 

So, what’s included with your personal car on lease?  You can take a personal lease on a non-maintained or fully maintained basis, the cost of course will vary.  Road fund license is included at the prevailing rate.  Just like the VAT is also included, you must be aware that it is at the prevailing rate and the time of taking delivery.  Should the chancellor decide to increase VAT which to be honest is expected at some point to help repay the debts created due to the Covid-19 pandemic, then you are responsible for the increase as the funder can’t control the tax levy set by the Government.  The vehicle of course has already been purchased so it’s the VAT on the monthly repayment and not the cost of the car.

Personal Contract hire is a good financially viable way to drive a brand-new car every 3 to 4 years and keep your repayments as low as possible.  Just like any other financial agreement, it is subject to credit checks and will appear on your credit report.  Leasing cars has become more popular over the last 10 years, as private individuals discover that it's a way to drive a better trim vehicle at a far more affordable cost.