Contract Hire and Leasing has grown enormously in popularity in recent years but it is not for everyone. Contract Hire limits you to a period of between one and five years and at the end of the term you hand the car back, as you have no financial interest in the vehicle.
If for example you are someone who looks at vehicle purchase as a cost, in isolation of other factors, then outright purchase may be your best option. It is however important, before choosing this route, to make a direct comparison with other methods of acquiring a vehicle, such as Contract Hire.
Buying a car that it is say two years old and selling it at five years old, can in some cases be the best way to minimize on motoring costs, particularly if it is an economy car that is going to do relatively low mileage and with a minimal amount of electronics; electronic problems are increasingly featuring in the cost of running older cars, nowadays.
The reason we say, in isolation of other factors, is because whilst buying a car at two years old and selling it at five, may be an effective way of buying a car, it can depending on the circumstances, be expensive in other respects. For example a company running a car that is say three or four years old has to consider a number of factors; firstly there is reliability; it can be very costly to have an employee sitting by the roadside in a car that has broken down. Costly both in terms of time and possibly lost orders and there is no question that cars become less reliable as they get older.
There is also the issue of maintenance, cars do require a lot more maintenance as they get older, this may not be a factor for someone who uses his car for the weekly shop and to occasionally visit relatives. It is far more important however for companies to have frequent maintenance checks on a vehicle that is older. If there should be a serious accident in the company vehicle and the vehicle is found to have a fault that caused the accident, or may have been a contributory factor, the company and it's directors or transport manager can be prosecuted. Interestingly the same law applies if an employee is driving his own car on company business, the company and its officers can be held liable. Unfortunately many companies are unaware of this fact, believing that they have escaped the liability when an employee is using his own car.
The other factor is image, if this is not important to you, and indeed why should it be, then that is another good reason to avoid changing your car just for the sake of it. For a professional person or a company it can be an important factor. Whilst it may not help your relationship with the company or individual who is buying from you, if you turn up in a Bentley Continental, there are risks attached to turning up in an older car; it can make people worry about the financial state of the individual or company they are dealing with.
Another consideration is the nasty surprises that cars can give you. If your mileage tends to be low, then whilst you can't rule it out, the chances of serious problems are considerably less; cars that are used in connection with business tend to be of a lot higher mileage. Certainly cars don't generally seem to go wrong whilst they are within the warranty period, they wait until the day after it expires. One of the biggest fears nowadays is the point mentioned earlier, electronic problems, which can be notoriously difficult to cure. It is not really a problem for a vehicle within the warranty period although it can be very inconvenient, but for a vehicle that is outside its warranty, it can be very disturbing to have this type of problem. Especially if it re- occurs each time you drive the car out of the workshop. There have been cases of dealerships offering to replace a car that is under warranty, after numerous failed attempts to cure a re-occurring electronic problem.
A factor that has influenced companies to opt for contract hire and leasing in preference to purchasing, apart from off balance sheet borrowing and the aforementioned considerations, is the hassle of car disposal. Cars have to be advertised and time has to be spent with prospective purchasers showing them the car, allowing them to test-drive it and arranging bank transfers etc. For someone who can do this in their spare time it is not too much of a problem, although some people do not relish the idea of strangers coming to their home. However for companies or professionals, this is often time that could be best spent concentrating on their business.
In summary if the vehicle to be purchased is a small engine economy car, your mileage is low, you are not concerned about image and you don't venture too far from home, so that if it does break down you are not stranded, then buying a second hand car and holding onto it long term, may be a sensible option. The increase in the popularity of contract hire and leasing over the years, probably tells us that nowadays not many people and organisations fit into that category.
Should you have any queries or questions with regard to Contract Hire and Leasing, Personal Contract Hire, Lease Purchase or Vehicle Hire Purchase, please do not hesitate to contact us. Bowater Price plc. 01494 536536.www.bowaterprice.com
