Your Essential Guide to Car Leasing versus Car Loans: Which is better for Your Needs?


If you have a business, then you need a car. It’s essential to get things done. But buying a car is a major financial outlay. So what can you do? Maybe you should consider contract hire as a way to get your hands on a new vehicle that you can use for business and personal driving, and this comes with many other advantages, besides. What are the advantages that come with car leasing versus car loans? Which is better for your needs? Here’s your essential guide.

Better control of cash flow

Businesses operate on a monthly cash flow forecast, and so with a small or medium-sized business, it is essential that you have the ability to know what the monthly obligations are going to be, which makes car leasing a vital financing option. Also, many business owners do not want to be planning to spend many thousands of pounds for a new van or car because of their business once they desire to expand. So car leasing contracts are a big help.

The big question: don’t you pay more?

Some people might reason that you will pay more for the vehicle in the long run. And this is a true but inescapable fact. But monthly expenses are cheaper and fixed for the term, which makes budgeting easier. Also, business people need to be able to grow as demand for their products or services increases, and without the proper contract hire agreement, this would be extremely hard. The best way to reduce any monthly premiums is always to pay a greater deposit initially, otherwise deferring a more substantial amount for payment during the contract.


As with any financial agreement, there exists a cooling-off period so you can consider your decision. The policy regarding cancelling throughout the lease needs to be clearly explained in the written terms of the agreement, and it is always worth clarifying the position should you wish to end the lease prematurely, for whatever reason.

What exactly is contract hire?

Contract hire is simply an agreement to lease a vehicle (a car or van) over a determined period of time, and maximum mileage limit, for a fixed monthly payment. The monthly lease payment is derived from the original price of the car or van, the permitted mileage, and the duration of the rental period.

A depreciation allowance can be factored into the final monthly payment. Scheduled maintenance is often included in the hire agreement, although this is not usually obligatory. Typical maintenance packages provide cover for all vehicle servicing required for the duration of the lease agreement.

Often offered as a 2-4 year deal, personal contract hire can be obtained by most individuals with a good credit rating.

It is just like other kinds of leases in that you will pay a preliminary low amount, which will be accompanied by fixed monthly payments over the period of the agreement. You can simply return the car and pay any fees that pertain to the end of the lease. Assuming that you did not damage the vehicle or exceed the mileage requirements too much. At the end of the agreed contract, you will be able to hand the car back to the vehicle leasing company or, if you prefer, you could choose to keep the car by paying the agreed residual value of the vehicle.

Overall, contract hire offers an ideal and flexible solution for those people who want a new car, at a fixed and affordable monthly cost, and are uninterested in owning a car.

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