How does lease car financing work?
If you’re new to car leasing, the process of how it all works can be confusing (pssst… in which case, our guide to car leasing may come in handy). One of the most common things we’re asked about when it comes to Leasing a vehicle is who supplies the finance for your car? And how do you know that you’re getting the best deal?
At Just Drive, we work with some of the world’s biggest car finance companies. Household names like HITACHI, Alphabet, Arval, Lex and Lease Plan. We’ll act as a go-between for you and the finance company, negotiating the best deal on your behalf.
We’re here to take the hassle out of leasing, helping you to secure the agreement you need to drive away in the car you want. For more about car lease financing, read on… or to start shopping for your next car, take a look at our latest leasing deals.
We’ll even get the vehicle delivered to your door.
What is financing a car?
In a nutshell, car finance is a way of paying for the car you drive, as you drive it.
There are loads of car financing deals you can choose from, each tailored to your needs. If you want the option to own your car at the end of the term, there are car leasing agreements which will offer this. If, however, you’re happy to lease eternally (and after all, why wouldn’t you be?), this can easily be arranged as well.
Who is my car finance agreement with?
When you lease a car through Just Drive, surely that’s who you’ll take your finance agreement out with? Actually, no. We like to keep things simple around here which is why we are just the Broker in the process of Vehicle Leasing between the Finance Company and the Supplying Dealer of the vehicle.
Your contract is actually taken out with Arval, HITACHI, Alphabet or any one of the FCA-regulated finance companies we work with. By working with the big guns of car financing, you can rest assured that your car lease is entirely secure.
Your car financing options
If you want the option to own the car you’re driving…
PCP car finance
It’s easy to confuse PCP — or personal contract purchase — with PCH (personal contract hire), another popular car financing option.
With both PCH and PCP agreements, your finance company will own your vehicle throughout the lease. However, with PCP car finance you can simply hand the car back but you also have the option to buy your car outright at the end of the lease with a balloon payment set at the beginning of the agreement. In which you could then sell or part exchange.
Lease Purchase (Business User HP)
If you’d like to own your vehicle, but are finding it tough to secure the funds, Lease Purchase could be for you.
As with all leasing deals, you’ll pay an initial deposit followed by monthly payments which are worked out based around the retail value and depreciation value of your car, plus interest.
Unlike other lease-to-buy financing deals, you do have to purchase your vehicle at the end of the lease. But, once that’s done, there’ll be no more payments. You can however sell at anytime during the agreement, you don’t have to stay in your contract for the entire time.
No Hassle Driving
If you’re happy to hand back your vehicle at the end of your contract…
PCH car finance (Personal Contract Hire)
When you think of Personal Leasing, you probably imagine something like this.
Like PCP, with PCH car financing you’re just hiring a car for a contracted length of time. At the end of the lease, the vehicle is handed back to the finance company. Damage charges and excess mileages may apply.
Although you never take ownership of your vehicle, Finance Leasing can provide you with a little extra cash at the end of your lease.
Here’s how it works: At the end of the finance lease contract, the Finance company will provide you with a balloon payment to make this extra money if the residual value of your vehicle if more than the Balloon Payment you will make some money from it. Usually, this means that the vehicle is sold and a proportion of the proceeds of the sale are returned to the lessee.
Finally, Business Contract Hire (CH)
This is largely the same as PCH, however the contract is put through a company.
The only real difference is if it is a VAT Registered Limited Company, they are able to claim a portion of VAT back. (50% of the VAT Element on cars and 100% of the VAT Element on Commercial Vehicles).
The company can also offset the initial payment and monthly rentals based on the co2 emissions against their Corporation Tax.