Conveyancing Brisbane

car insurance

One of the biggest hits your wallet or purse will take in its lifetime will probably be immediately after the purchase of a new car. Once the status of a new vehicle changes from brand new to one previous owner, a vehicle can lose more than a quarter of its value – literally as soon as you sign your name on the registration document. By opting for a personal contract hire agreement, you can avoid the huge loss that arises from depreciation.

Though there are a few different types of vehicle finance agreements, and lease agreements, the most popular form of personal vehicle leasing is the personal contract hire agreement. The idea is, when you sign the contract, you will be required to pay a fixed amount every month for control of the vehicle over the course of the stipulated lease period. With a personal contract hire agreement, the lessor will always be the sole owner of the vehicle and the lessee will not have an option to purchase the vehicle at any point.

Over the course of the personal contract hire agreement, the lessee must make fixed monthly payments to the lessor, which are based on the depreciation of the vehicle over the term of the contract. The residual value of the vehicle at the end of the contract determines the monthly payments that the lessee needs to make. To estimate that figure, the lessor must make certain stipulations in the contract that the lessor must adhere to, such as a limited annual mileage and vehicle condition.

The benefits to personal contract hire are vast. One of the most important to most people is the decrease in responsibility that the lessee has in comparison to other forms of vehicle purchase agreements. At the end of the contract, once the last payment has been made, you are free to hand the keys to the vehicle back to the lessor and walk away, literally. Also, you have the option, with most lease companies, to purchase an additional maintenance agreement which will pay for any repairs or replacement parts that the vehicle needs during the course of the contract.

With all personal contract hire agreements, your road fund license for the vehicle will be paid for by the lessor, plus you will not have to lose sleep over the depreciation rate of the vehicle as you will not be selling the vehicle at the end of the contract. The monthly costs of personal contract hire agreements are usually much cheaper than personal loans, so it makes for a much more cost effective solution to the problem of vehicle acquisition.

It is difficult to see the downsides to personal contract hire as there seem to be so many advantages. One, of course, is that you will never own the vehicle that you are leasing; but the other side of the coin is that you will be able to take control of a vehicle that is way out of your budget, because high- class ‘luxury’ cars have a tendency to hold their value better, which consequently means lower monthly lease payments.

Next : Contract Hire