Car Leasing Deals Useful Information

Car Leasing

Car leasing, also known as contract hire, is a term used in the UK to describe a vehicle supplied on a contract for a period of time to an individual or business to use for that period, at the end of the contract period it is returned to the leasing company. The vehicle remains the property of the leasing company and never becomes the property of the lessee.

The UK contract hire & leasing industry is largely driven by companies funding vehicles for their businesses, either directly (business contract hire) or by offering car allowances to employees in the course of their business (personal contract hire). Lately has also seen a dramatic increase in personal contract hire by individuals, mainly because the whole life cost of this method of acquiring a vehicle is much cheaper and less risky than purchase.

Contracts range from 12–60 months; the cost of the contract is calculated by taking into account the depreciation of the vehicle (assessed from the time period and mileage driven) and the interest charged for the cost of the money used by the leasing company to buy the vehicle. Each contract can be fine tuned to individual requirements for both individuals and companies. Generally the road fund tax is included in the monthly rental.

The industry has a representative body - British Vehicle Rental and Leasing Association (BVRLA), which governs the conduct of leasing companies, leasing brokers and rental companies; membership of this body is strictly controlled and admittance is dependent on potential members demonstrating high service levels and conforming strictly to the BVRLA code of conduct. If an organization is not a BVRLA member then prospective customers for leasing should be extremely wary when considering their leasing options. BVRLA members have over 2 million vehicles under management in the UK; their activities also include lobbying MPs in relation to adverse fiscal matters which may affect the industry and consequently vehicle drivers. Blueroc Ltd t/a leasing4u are proud to be a BVRLA leasing broker member.

Apart from the major players who concentrate mainly on corporate fleets and affinity car schemes, a very competitive independent broker network has emerged, supplying in excess of 300,000 vehicles a year mainly to small / medium businesses and personal users. Brokers help small companies and private individuals find cost effective leasing solutions by using their preferential discount terms, discounted funding plans and comparing prices from a different funders.

Companies and private individuals can lease vehicles with or without a maintenance package included in the agreement, maintenance will cover all aspects of servicing, repairs, maintenance and tyre replacement; a relief vehicle in the event of a breakdown can also be included if requested. Contract hire is a very popular choice for VAT registered companies as they can claim back 50% of the VAT on the finance element and 100% on the maintenance.

Tax advantages and reduced administration help businesses to budget more accurately for their vehicle requirements. Contract hire is available to private individuals over the age of 18, sole traders, partnerships and limited companies.

The Main Advantages of Contract Hire are:

  • Accurate monthly budgeting
  • Off balance sheet
  • Improved cash flow
  • All calculations are made using “net of VAT figures” thus reducing funding costs.
  • Minimum capital expenditure
  • Protect your capital budgets
  • Fixed interest rates
  • Rentals allowable against taxable income, subject to the 'half the excess rule' partial disallowance
  • VAT recoverable on monthly rentals
  • No depreciation risks as the responsibility for disposal of the vehicle rests with the leasing company.
  • 50% of the VAT relating to the finance element is recoverable if car has private usage. 100% if business only. On contracts with maintenance the service element VAT at 100% is recoverable.
  • No vehicle disposal problems
  • Reduced administration
  • On-going advice and support
  • Road Fund Licence provided (vehicle excise duty paid) for duration of contract
  • Optional maintenance package
  • Optional breakdown rescue cover
  • Optional replacement vehicle cover in event of breakdown
  • Optional GAP insurance
  • GAP insurance (loan/lease payoff coverage) provides cover for the shortfall between the outstanding finance and the insurance value if the vehicle is declared a write-off by your insurance company

Leasing offers advantages to both buyers and sellers. For the buyer, lease payments will usually be much lower than payments on a car loan and qualification is often easier. Many consumers prefer leasing as it allows them to simply return a car and select a new model when the lease expires; this allows a consumer to drive a new vehicle every few years without the responsibility of selling the old vehicle. A lessee does not have to worry about the future value of the vehicle, but a vehicle owner does.

At the commencement of a contract the estimated mileage and subsequent age of vehicle (length of contract) is used to calculate the monthly payment, if the estimated mileage is exceeded then an excess mileage charge is applied at the end of the contract. On return at the end of the contract the vehicles condition is subject to an industry standard “fair wear and tear condition inspection”. If there is damage on the vehicle this will be repaired and charged after inspection.

How lease payments are calculated:

Any mileage can be chosen by the lessee and any period from 12 to 60 months, for this example we will use 3 years travelling an average of 10,000 miles a year. From the chosen vehicle an assessment of what the value will be for that particular car after 3 years is made with 30,000 miles and in a condition commensurate to age.

Length of contract – 36 months depreciation for 30,000 miles total eg. = £3600
Cost of funding the vehicle for the 36 month period eg. = £2800
Road fund licence estimated cost over 2 extra years eg. = £300

Total cost of the lease = £6700.00

The whole lease cost is then spread across the contract period; this amount is split into different types of payment plans. The most common plan is an advance payment equivalent to 3 monthly rentals followed by regular single monthly payments until the end of the contract.

As an example, for a 36 month contract with a payment plan of 3 months in advance followed by 35 monthly payments, the lease cost of £6,700.00 is divided into 38 equal amounts - £176.32. The initial payment in this case would be £528.95 followed by 35 regular payments of £176.32 which covers the entire lease cost.


© 2006 - 2017 Blueroc Ltd t/a Leasing4u. All rights reserved

Car leasing credit broker (not a lender) Leasing4u is a trading name of Blueroc Ltd - Registered in England number 05139277 Registered office Unit 4 Mallard Court, Mallard Way, Crewe, CW1 6ZQ; Data Protection Z8611873; Authorised and regulated by the Financial Conduct Authority, Firm Ref No 660124. All information contained in this website is current at the time of publication and whilst the greatest care has been taken over its compilation, leasing4u cannot be held responsible for any errors or omissions. Business Contract Purchase prices displayed do not include the price for RFL which is included in the contract, this additional amount will be shown on your confirmed quotation as a services cost. Please note it is illegal to enter into a finance arrangement on behalf of another person. Carleasing4u and leasing4u are registered trademarks and we may also be know as Car Lease 4u, Carlease4u, carleasingforyou, carlease 4 you. All photographic images are for illustration purposes only and may not depict the relevant model. We are a Leasing Broker Member of the BVRLA and our membership number is 1431. E & OE.