Lease purchase and contract hire are two common types of car leasing agreements. While these terms are often used interchangeably, they are actually quite different. In this article, we will explore whether or not lease purchase is a form of contract hire.
First, let`s define the two terms. Contract hire is a type of car leasing agreement where the customer pays an agreed monthly fee to use the vehicle for a set period of time, typically two to five years. At the end of the contract, the customer hands the car back to the leasing company.
Lease purchase, on the other hand, is a type of finance agreement that allows the customer to buy the car at the end of the lease period. The customer pays an initial deposit and then makes monthly payments over a fixed term, typically two to five years. At the end of the lease period, the customer has the option to buy the car for a pre-agreed price or hand it back to the leasing company.
So, is lease purchase a form of contract hire? While lease purchase and contract hire share some similarities, they are not the same thing. Contract hire is a pure leasing agreement, while lease purchase is a form of finance agreement with the option to buy the car at the end of the lease period.
Some people might confuse the two because both types of agreements involve paying a monthly fee for the use of a car over a set period of time. However, the key difference is what happens at the end of the agreement. With contract hire, the car is simply returned to the leasing company, whereas with lease purchase, the customer has the option to buy the car.
Another significant difference is the amount of control the customer has over the car. With contract hire, the customer must return the car in good condition, without any modifications, and within the agreed mileage limit. With lease purchase, the customer has more freedom to modify the car as they see fit, as long as they make the necessary payments.
In conclusion, while lease purchase and contract hire may seem similar at first glance, they are actually quite different. Lease purchase is a form of finance agreement that allows the customer to buy the car at the end of the lease period, while contract hire is a pure leasing agreement where the car is simply returned to the leasing company at the end of the contract. It is important to understand the differences between these two types of agreements to make an informed decision when leasing a car.
