In recent years there has been a growth in the popularity of Personal Contract Hire – aimed at private customers (non-corporate and non-VAT registered).
The agreement allows anyone to experience the benefits of driving a new vehicle on a regular change-cycle basis without the often large depreciation costs associated with owning new vehicles outright.
As a lessor (leasing company) is able to reclaim the input VAT on the purchase of the vehicle (whether a car or commercial vehicle), it means that the interest is added to the ex-VAT price of the vehicle and results in lower payments than traditional finance agreements such as Hire Purchase.
It must be noted, however, that all personal contract hire rentals attract VAT and that the majority of lessees, especially private individuals, will not be able to recover this as they will not be VAT-registered.
The structure and features associated with Personal Contract Hire are the same as contract hire for business customers.
