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Over the last few years, new vehicle sales have hit a rocky patch. Many people are facing the credit crunch and are finding it hard to even consider purchasing a new car. A finance agreement could be one solution, but the costs involved are still quite high and even with many manufacturers offering great deals, it is still not the cheapest alternative. This is where a personal contract hire agreement comes in.

A brand new vehicle can lose over 25% of its value as soon as it is purchased. What that means is that as soon as you drive the car from the showroom, you will have immediately lost thousands of dollars in sales value. If you obtain a vehicle through a personal contract hire agreement, then you can avoid the massive loss in value that you would get if you purchased a car outright or through a finance agreement.

Personal contract hire is simply a long term rental agreement between individuals and vehicle leasing companies. Lease terms generally range from 12 months up to 60 months. Individuals pay monthly premiums to rent the vehicle for the duration of the contract and at the end, lessees can simply give the car back to the lessor without any further obligations.

Personal contract hire agreements have been increasing in popularity because it works out cheaper per month to rent a vehicle than it does to purchase. The total cost of the monthly rental figure is based on, primarily, the depreciation of the vehicle over the duration of the agreement, plus also any leasing taxes or other service costs which the lessee will have negotiated with the lessor.

With a personal contract hire agreement you have the added benefit of a brand new car every few years. Depending on what you requested in the agreement, you may also have free maintenance costs on the vehicle and also breakdown cover, all tied in to the monthly rental cost.

There is one downside to a contract hire agreement; mileage limitations. The average mileage for motorists over the course of 1 year is around 12,000 miles. Depending on what you have negotiated on with the leasing company, it is likely that you will be limited to between 10,000 and 12,000 miles per year. If you exceed that amount, expect to have to pay a penalty on conclusion of the contract.

So in terms of the downsides of a personal contract hire agreement, the only one is that once the contract has ended, you will have to give the vehicle back. But if you love the thought of getting a new vehicle to drive every few years and don’t want the financial worry of a vehicle outside of a manufacturers warranty, then a personal contract hire agreement is the choice for you!

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