What is contract hire and leasing

What is contract hire and leasingMany people find it difficult to save up for a new car and when they do manage to do this, it is quite often a large financial outlay. The buying of any car, whether it is brand new or used, will usually represent a significant financial sum. As a result of this, there are numerous finance packages that have been brought to the market to allow people to buy cars in different ways. Rather than paying for a car in a lump sum at the beginning there is the opportunity to pay a deposit and then pay the car off monthly; in some cases this can be done without an interest being paid.Another popular financing model is the use of contract hire and car leasing; these models are usually offered on brand new cars. Essentially a contract will be agreed where a person takes a car for a fixed tern period, making monthly payments for doing so and then hands back the car at the end of the fixed term. This model has become particular popular with businesses as it can often be tax efficient. Some car leasing companies will also allow the car to be bought at the end of the period rather than simply being handed back.Generally there are some terms and conditions within the car leasing contracts that should always be considered. Some car leasing firms will require a deposit in order to offer the agreement; this is particularly true on high value cars. The majority of car lease agreements will state the maximum number of miles that can be travelled in the car during the period. Any mileage over the agreed quota will be charged at a separate fee, this is usually quite expensive and can bring the monthly costs up majorly.Quite often the use of contract hire and car leasing can be very effective for people who are self employed; tax benefits can be gained through this arrangement. In order to get these benefits the self employed individual must be paying VAT. The use of contract and car leasing is not always the best option and therefore it is advisable to assess all of the possible options.