Mazda’s Contract Hire scheme has been obliterating all of its previous records this year – during the first quarter of its 2014-2015 financial year (April – June) Mazda Contract Hire put more than 300 new vehicles on the UK’s roads compared with 153 cars in the equivalent period last year.
If Mazda’s Contract Hire business continues at the same rate for the rest of the year, it’s predicted to beat last year’s incredible result – 1,133 cars were leased in over the period April 2013 to June 2014. That’s an increase of 214%, which smashed Mazda’s previous best set seven years earlier.
So, with Mazda setting a new contract hire record, and on target to break another, as part of our Friday Focus we’re looking into exactly what Contract Hire is?
WHAT IS CONTRACT HIRE?
When it comes to cars, most contract hire agreements refer to personal contract hire plans. This means the arrangement is between the business and you only. There are other types of contract hire agreements, including business contract hire for vehicle fleets.
Contract hire is really a straightforward rental agreement, whereby you, the customer, get the use of a vehicle for a fixed term, with payments made to hire the car over the same period.
There are generally some stipulations, including an annual contract mileage. This is a limit to the distance you can travel in your hired vehicle over one year. It can be lengthened or shortened, but it will cost you.
Likewise, if you go over the mileage limit without telling your contract hire company, you could be hit with a hefty fine when you give the car back at the end of the agreement.
WHO OWNS THE VEHICLE IN A CONTRACT HIRE AGREEMENT?
As you, the customer, are simply renting the vehicle from the finance provider, the car is never actually yours to own.
It’s the property of the contract hire company.
WHAT HAPPENS IF I GET CHARGED FOR DAMAGE AT THE END OF THE CONTRACT HIRE PERIOD?
At the beginning of the contract period, you may have had to put down a security deposit.
As the contract hire company owns the vehicle throughout your time with the car, if the vehicle is returned damaged or in an inadequate condition (determined by the contract hire company), you’re deposit could be docked to either repair the car or restore it to a satisfactory state.
WHAT ARE THE BENEFITS OF PERSONAL CONTRACT HIRE?
There are always positives and negatives to any decision. When it comes to contract hire, leasing a car in this way means you don’t have to deal with issues such as depreciation.
As you don’t ever own the car, you don’t ever have to sell the car, which means you don’t ever experience the decline in value. Your regular payments do factor this in partly.
Often, you don’t have to pay for servicing either, as this can be included in the contract hire agreement.
WHAT ARE THE DRAWBACKS OF PERSONAL CONTRACT HIRE?
One of the major negatives to personal contract hire is that you don’t ever actually own the car.
This means at the end of the agreement, having paid your monthly costs, you are left without a vehicle.
As we mentioned, there are positive to this, but many view this in a similar way to renting a flat or a house – it’s dead money. As your regular payments will go some way to covering vehicle depreciation, it means your payments account for this, but you’re not left with the asset at the end of the term.