After a house, a car is usually the most expensive single purchase anyone will make. The rules also suggest that it is also the quickest depreciating item and loses value as soon as it is driven off the showroom forecourt. Car leasing deals are one way of negating the effects of depreciation when looking at a new car.
Leasing functions the same way as Company Contract Hire, only the vehicle is solely for private individuals. Personal Contract Hire means that you take responsibility for the lease of a car over a specific period, after which you simply return the car to the dealer.
The dealer calculates the value of the car once the contract period has ended, a part of this calculation is that drivers agree to stick to a specific annual mileage; failure to do this will incur certain costs.
The benefits are that both new and used cars can be hired on a fixed price cost, which tends to be lower than a personal loan. Road tax and maintenance can be incorporated into the agreement and as you will not have to sell the car at the end of the agreement there are no depreciation worries .
Lower costs mean you can perhaps lease a more expensive car than would ordinarily be available to you under a purchase agreement.
There is of course the fact that under these agreements you will never own the car yourself. Neither will you have the option to buy it at the end of the lease period. If you do get attached to your vehicles you drive, it might not be ideal to know you will need to give yours away within a couple of years. You will also need to take out a fully comprehensive car insurance for your lease car.