Why buy Gap Insurance for a contract hire lease?

Why buy Gap Insurance for a contract hire lease?

Contract Hire leases are one of the most popular ways for new vehicles to be acquired in the UK today. This has often been the case with business vehicles, but more and more Personal Contract Hire agreements are now taken, perhaps in preference to the likes of retails finance solutions such as hire purchase or personal contract purchase (PCP). Why is Contract Hire so attractive? Well there are a number of tax benefits to businesses, such as ‘off balance sheet’ accounting, and the ability to claim at least part of any VAT back on the lease. However, the overriding advantage is simply that contract hire leases are often at a lower monthly cost than other styles of finance. You see leasing companies will often use huge fleet discounts to procure the vehicles initially. This means that the lease agreement can allow for very low monthly costs, as the vehicle will have a smaller difference between the original discounted fleet price, and its potential residual value at the end of the lease. Manufacturers offer attractive deals to leasing companies who can place a large number of new vehicles to a range of clients. The main difference between a PCP or Hire Purchase agreement, and that of a Contract Hire lease is simply that you never have the option to own the vehicle in question with a contract hire agreement. The vehicle is usually registered to the leasing company, and you do not have any option to buy as part of the agreement. Some people do not like the idea of never owning the vehicle, however all vehicles are depreciating assets,...