TERMINOLOGY EXPLAINED

What is car leasing:

Car Leasing is an understanding that enables customers to hire a car for a specified period and preset mileage by paying a fixed monthly instalment.

One of the benefits of paying for a car in monthly instalments is that it brings many of the top brands financially within reach of more people.

There is a lease deal available for every budget, and covering the full range of personal contract purchase (PCP), personal contract hire (PCH), lease purchase, hire purchase and contract hire.

Contract Hire:

Contract Hire enables companies to release cash normally tied up when purchasing vehicles outright, with low initial payments followed by fixed all-inclusive monthly rentals for service, maintenance and repairs if required. The low regular payments attributed to Contract Hire are partly due to lenders being able to reclaim the VAT on the purchase price of a vehicle, thus allowing savings to be passed on to you by way of reduced monthly rentals.

Finance Lease:

Finance Lease is an on balance sheet car leasing option. VAT recoverable, suited to those who wish to take the risk of ownership as the hirer is responsible for the balloon payment.

Business Contract Purchase:

The difference between business contract purchase and contract hire is that you retain the option to keep the vehicle at the end of the agreement. This is a more flexible lease method as you can return the vehicle to the lease company, or extend the contract, or keep the vehicle, but you don’t have to decide until the contract is over.

Personal Contract Purchase:

Contract purchase for personal cars works like business contract purchase; the contract is designed specifically for the private user, and your options as to keeping or returning the vehicle are open until the end of the contract.

Personal Contract Hire: (PCH)

PCH is a car leasing option popular with ex-company car drivers, offering fixed price risk free motoring, with no pre-set option to purchase. This option operates in exactly the same way as business contract hire.

Hire Purchase:

One of the most common forms of financing a vehicle is through a process known as ‘hire purchase’, which allows you to take ownership of a car once all payments are made.

Hire purchase combines elements of both a loan and a lease. You reach an agreement with the dealer to pay an initial deposit and then pay off the balance in monthly instalments over an agreed period of time. At the end of this period, the car is yours.

Unlike a lease or a personal contract purchase agreement, the residual value of the vehicle is not taken into account. Instead your monthly payments are determined by the retail price of the vehicle, the size of the deposit and the length of the contract.

In effect, the contract is between you and the lender (usually a bank or broker) but is normally arranged by the dealer. The lender effectively buys the vehicle and allows you to use it while you make payments. Only when all payments are complete is the car officially yours.

Lease Purchase:

Lease Purchase is a car finance option similar to contract purchase, however the balloon payment at the end of the contract is the hirer''s responsibility.

B.T.I. Vehicle Leasing is an independent credit broker.