Contract Hire is not always logical so use an expert
Friday, 3. February 2017
Contract Hire or car leasing as some people call it can be very confusing because you can’t always apply what you may consider to be logic. Let’s take metallic paint for example. Some leasing companies will provide you with free metallic paint and given the fact that metallic for most cars costs north of five hundred quid you’d be silly not to take it. But are they actually being generous?
No they’re not because careful scrutiny of some quotes that I run shows that the addition of metallic paint, whilst increasing the cost of the car actually drops the monthly rate. A recent BMW quote dropped the rate by £6 + VAT per month when I added metallic paint.
This may sound daft but it’s all down to the resale value at the end of the agreement. A prestige car with metallic paint is much more desirable in the used market than a solid colour car and this is often reflected in the prices achieved through auction. So from the leasing company’s point of view, whilst they may have to pay an extra £400 for metallic after discount they could be £7-800 better off when they sell the car in 3 years time.
The same can apply to the spec. of the car. We have had a number of deals over the last few months where a better spec car can be leased for less than an entry level car. This can be partly because some extra discount has been given by the manufacturer but is often because of the desirability of the car through auction.
Some examples are the Jaguar XF where the R-Sport was less per month than the SE and the Jeep Renegade Sport was more expensive than the better spec. Longitude. So don’t dismiss the higher spec. because you think that the higher spec. car will cost a lot more per month because the list price of the car is much more.
The VW Touareg R-Line is £377.45 + VAT per month and the R-Line Plus is just £3 + VAT per month more at £380.54 + VAT and yet the spec. is much improved. Contract hire is a product that often defies logic – speak to me! By Graham Hill
