The first, and most important, aspect to note is that you need to confirm what financial product has been used in conjunction with your vehicle. A “lease” generally refers to one of two products, namely:

  1. Contract Hire; and
  2. Personal Contract Purchase (PCP).

What are my options at the end of a lease deal?

Contract Hire:

A contract hire arrangement is what we refer to as a usership-style product. This is a contract to use a vehicle over a predetermined amount of time (2, 3 or 4 years) and an agreed amount of mileage (5,000 – 50,000 miles per annum). As part of the arrangement either you will be responsible for all servicing, maintenance and tyres (driver-maintained) or this will have been included within the cost of the contract (funder-maintained).

As a credit broker, we work alongside a select number of finance companies and each company will utilise a distinct approach to a contract hire agreement. Before you make a decision, you need to either contact your credit broker, or the finance company directly, to enquires as to what exactly you are permitted to do. Your options will generally include:

  • Return the vehicle – on or before the contract cessation you are entitled to return the vehicle, so long as all of the required rentals have been paid. If you haven’t paid all of the rentals you can only return the vehicle after going through a process known as “early termination” which often includes paying half of the remaining rentals before collection can occur. In terms of the collection process, this basically means organising with the finance company, or credit broker, for a representative of the auction to come to your home or business address to review, appraise and subsequently collect your vehicle. There is no cost for this process unless you have incurred a) excess mileage; or b) damage which falls outside of the fair wear and tear guidelines. For more information on collection, do review our useful guides. As part of being organised, try to arrange collection of your vehicle at least 2 weeks’ before the contract ends. In some cases, we require a weeks’ notice to organise collection. If this date goes beyond your contract end date, you are liable to pay (pro rata) for any additional use of the vehicle. Please also note, if you paid an initial rental (i.e. 3 spread/6spread/enhanced) this is not refunded to you as some customers would believe, as this is not a refundable deposit – it merely formed part of your rental payment structure;

  • Extend the contract (formally) – in some cases, the finance company will allow a customer (personal or business) to enter into a new contract for an additional 6 or 12 months. However, not every finance company will allow this, so do not presume this is an option available to you. In order for most credit brokers to explore this with you, we need at least 1 months’ notice to get the quotations across to the customer and for the new contract to be put in place. Please note than the price you will pay on a formal extension will vary in price in comparison to your existing arrangements – sometimes this is more expensive and is some cases this will produce a cheaper rental. For a customer this can be a positive way to keep a vehicle they are comfortable with and without the need for any deposit/initial rental. If there are no replacement deals which you are interested in, this might be a pragmatic option;

  • Extend the contract (informally) – in some cases, the finance company and the credit broker (i.e. CarLease UK), will allow you to retain the vehicle for a short-period of time after the contract ends. You will continue the pay the same, or similar, rental per month and the contract will remain on the same terms and conditions as per before. As part of this process, we will charge a fee ranging from £150 to £250 plus VAT for continuing to manage your car/fleet. Please note that on an informal extension the car can be collected at any time; and

  • Purchase the vehicle - in some cases, the finance company will allow a customer to make an application to purchase the vehicle. As contract hire is a usership based product, purchasing the vehicle is actually quite rare and is not always available. For customers who do want to buy their contract hire (and where it is possible), do note that the price you will pay for the vehicle will be based on a market valuation and will in no way reflect the rental payments you have already made. As per the extension above, do provide your credit broker at least 1 months’ notice if this is the desired route forwards. Please do not enter into a contract hire agreement if you do want to purchase the vehicle.

PCP

A PCP arrangement is what we refer to as an ownership-style product. This is a contract to purchase a vehicle over a predetermined amount of time (2, 3 or 4 years) and an agreed amount of mileage (5,000 – 50,000 miles per annum). As part of the arrangement wither you will be responsible for all servicing, maintenance and tyres (driver-maintained) or this will have been included within the cost of the contract (funder-maintained). When you provide the mileage and term, you will also be provided with the guaranteed future value (GFV) / balloon amount, which is payable at the end of the contract.

Your options at the end of a PCP deal will generally include:

  • Return the vehicle – on or before the contract cessation you are entitled to return the vehicle, so long as all of the required payments have been paid. If you haven’t paid all of the rentals you can only return the vehicle after going through a process known as “early termination” which often includes paying the remaining payments before collection can occur. In terms of the collection process, this basically means organising with the finance company, or credit broker, for a representative of the auction to come to your home or business address to review, appraise and subsequently collection your vehicle. There is no cost for this process unless you have incurred a) excess mileage; or b) damage which falls outside of the fair wear and tear guidelines. For more information on collection, do review our useful guides. As part of being organised, try to arrange collection of your vehicle at least 2 weeks before the contract ends. In some cases, we require a weeks’ notice to organise collection. Please also note, if you paid an initial rental (i.e. 3 spread/6spread/enhanced) this is not refunded to you as some customers would believe as this is not a refundable deposit; or

  • Purchase the vehicle – unlike contract hire, you already know by virtue of the GFV/balloon what the vehicle will cost at the end of the contract. If you want to keep the vehicle, you need to pay this amount to own the vehicle. A word of caution – please do not presume that the GFV will reflect the market value of the vehicle. You should never enter into a PCP with a view this will make money/be a profit exercise. As the market will change over 2/3/4 years, no supplier can tell you that the car will reflect the market value or that you will be able to draw equity from the vehicle. Additionally, never set a PCP on the incorrect mileage in order to make a payment “affordable”. Not only does this make the GFV unrealistic but if you do return the vehicle, you will receive a sizeable excess mileage bill.

If you would like to know more about extending your lease car or returning your lease car at the end of the contract period, simply contact the team at CarLease UK who will happily walk you through some of the principles in more detail. For more Help and Advice on leasing a car, simply head on over to our Help and Advice Pages HERE or read more about the lease car industry in our Blog Pages Here... You can also find some of the best car leasing deals and special offers Here for when it comes time to change your lease car.

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