What Is Contract Hire – Explained

Contract Hire is a very specific type of finance, and as such, would always require a credit check to see if you are eligible.

In essence, Contract Hire (otherwise known as leasing) allows you to get a brand new car without the hassle of long-term ownership. You’ll simply pay a monthly rental and an initial deposit. Once your contract term has ended, you’ll hand the car back.

You define the terms, so if you want to lease a vehicle for 36 months and 10,000 miles per annum, you can do that. Your initial deposit (typically 1, 3, 6 or 9 months) is calculated by taking your monthly payment and applying it to how many months deposit you want to put down. The more deposit you put down, the lower the monthly payment.

The way a lease is visually structured is usually ‘Deposit + Term’, so some examples you might see would be 3+35, 6+23 or 9+47. It looks a little confusing because it looks like you are paying 35, 23 or 47 months worth of payments, that’s incorrect. You are still paying 36, 24 or 48 months worth of payments (plus your initial deposit), but they visually structure it that way as it’s implied that the 1st payment and deposit has been paid. Looks a little odd I know…

Maintenance (if you pick this option) is applied to almost all consumable parts outside of a standard manufacturers warranty. For example, tyres, roadside assistance, servicing, MOT’s etc. This option is particularly useful if you do a lot of miles or have a longer lease, as it can save you money long term, but does cost a little bit extra per month for the convenience.

Contract Hire doesn’t offer you the option to buy your vehicle at the end of the contract (term), which differs from other popular finance options such as PCP (Personal Contract Purchase). It really depends on your personal circumstances and lifestyle as to which you choose.

Contract Hire is generally considered the least expensive option for a new car, but it does come with pros and cons just like other types of asset finance.


  • Generally cheaper than PCP (unless incentivised)
  • You don’t need to worry about depreciation.
  • No balloon payment at the end of your contract.
  • You don’t need to sell the vehicle.
  • Hand the van back at the end of your contract.
  • Can be fully maintained by the dealer (optional).
  • Vehicle delivered and collected at your door.


  • Restricted by mileage (excess mileage fee).
  • Excess wear and tear fees apply if the vehicle is damaged.
  • Early termination fee if the contract is ended mid-agreement.
  • You won’t own the vehicle.