With the new 64 plate registrations fast rolling off the forecourts in the UK, the vast majority of these new vehicles will be funded in some manner. Motor dealers have a range of finance options for this, often a straight Hire Purchase deal, or the more and more popular Personal Contract Purchase, or PCP agreement. However there seems to be a growing trend towards another form of finance, one which for many years seemed almost exclusively used by business, the Contract Hire agreement.

Getting a vehicle on Contract Hire is quite different in many ways to a more traditional hire purchase based finance package. The biggest difference is that it is, in essence, a long term rental agreement with no option for the lease holder to buy the vehicle at the end. Of course this does put some people off as they never own the vehicle, but this is less of an issue for businesses who simply regard the ‘rental’ as a cost of the business.

So why should ‘retail’ customers now consider a Personal Contract Hire deal above a hire purchase agreement? Well the clear advantage at the moment is simply the cost. There are some terrific deals currently available on Contract Hire, and these can equate to a much lower overall cost over the agreement term, than say a PCP deal on the same vehicle.

Examples of this for the final quarter of 2014 would be the VW Golf R, widely available for around £250 per month, yet the lower GTD models are approaching double that monthly outlay on PCP.

So why such a big difference in price?

Well leasing companies do get much better discounts on the vehicles that a standard retail customer. This means that funding a discounted vehicle, that will still have the same residual value as a 2 year old vehicle regardless if it is on PCP or PCH, means that lower monthly rentals can easily be achieved.new car contract hire

We have seen a rise in smaller leasing brokers on the online market, and even a number of leasing brokers opening high street shops. Is a sign that the market may be shifting from hire purchase based finance to contract hire? It may be too early to make such a bold statement, but it is clear that consumers are giving contract hire firm consideration for their new vehicle.

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