On the surface, car hire and car leasing sound pretty similar. You pay a company some money and can borrow their car for a set period of time.
But that’s kinda where the similarities end.
In this article, I’m going to take a whistlestop tour through car hire and car leasing, looking at all the differences and similarities.
(Oh, and to keep things simple, when I talk about car leasing, I’m only really talking about Personal and Business Contract Hire. Yes, there're lots of other types of leasing arrangements out there but I’ve not got enough time to look at them all.)
Time’s probably the biggest difference between car hire and car leasing. Car rental tends to be fairly short-term, ranging from a couple of days to a few weeks. You do find some companies will offer long-term hire up to a year or two but this tends to be quite uncommon — and often quite expensive.
Car leasing contracts, on the other hand, usually to run for between two and four years.
Actually, while we’re talking about timescales, I recommend you watch out for four-year deals as your final year tends to be out with the protection of the manufacturer’s guarantee.
When you lease a car, it comes to you directly from the factory. Seriously, you order it, they build it. (Unless it's sold as in stock. In these cases, the car has been ordered and assembled but the lease has fallen through. You usually find in stock cars are cheaper to lease and the lead times are days instead of months.)
A lease car will be brand new with a handful of miles on the clock and you’ll be the first owner. Once your leasing deal has expired, the finance company takes the car back and sells it on as used.
Hire cars, on the other hand, are a bit different.
You see, hire companies will buy up (or potentially lease) used or new cars and rent them out to customers to make a return on their investment.
That means that — unless you get super lucky — your hire car won’t be new. It’ll probably have been driven fairly heavily by a number of previous (and often careless) drivers.
Hire companies will do their best to maintain their fleet but it’s often not cost-effective to repair every single ding, dent, bump and scrape.
Car leases are usually arranged through a leasing broker. Technically, the brokers are brokering a leasing deal with a larger finance company that stumps up the cash but most, if not all, of your interaction will be with the broker and not the finance company.
Rented cars, however, are usually owned by a hire company and are rented out to drivers.
Most, if not all, leasing contracts will insist you have fully comprehensive insurance. On top of that, some will also ask you to take out Guaranteed Asset Protection (GAP) insurance, too.
GAP insurance basically insures the car for the new list price, rather than the used price at the time. Here’s how it works.
Let’s say you lease a Mercedes-Benz C200 Sport for a £2,936.61 initial rental and £326.29 monthly payment. Before it rolls out of the garage, that Mercedes is worth a little north of £30,000. Two years and 20,000 miles later, it’s worth just £20,000.
Now, if you were to write the car off in year two of your leasing deal, a normal insurance company will only pay out the value of the used car, which is £20,000.
GAP insurance covers the difference between the car’s price at the time of the accident and its sticker price, which, in this case, is £10,000. This protects the finance company's investment from fluctuating used car prices.
Leasing insurance done, let’s have a look at hire cars.
On the other hand, hire cars will have some insurance but it might not be fully comprehensive and you might be liable for any damage caused. There’s so much variation between hire companies that it’s tricky to give any real advice.
Make sure you read the paperwork and ask about the insurance Tees and Cees. You don’t want to leave a small ding in the bodywork and find out you’re liable for replacing the whole panel.
With hire cars, it’s also a good idea to take some pictures of the car before you drive away. If the hire company tries to blame you for damage that you didn’t cause, it’s handy to have some hard evidence on your side.
As you’ve probably guessed from the rest of this article, car hire and car leasing are two very different services and that results in two very different prices.
On one hand, you’ve got car leasing, which is designed for long-term motoring. On the other, you’ve got car hire, which is designed for short-term motoring. So, it's very difficult to compare the two costs in any meaningful way.
However, we still want to give you an idea of the difference in price so we’ve sourced some quotes for a basic Vauxhall Corsa. The car leasing quote uses a 24-month contract with a nine-month initial rental. The car hire quote just uses one-day, one-week and one-month quotes.
As you can see, the per day costs are substantially lower with a leased car than they are with a hired car.
However, with leasing, it’s important to remember that you’re locked into a multi-year deal. In this case, we chose a 24-month contract. If you only need a car for a couple of days, weeks or months, it would be madness to lock yourself into a multi-year deal.
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So now you know the difference between car hire and car leasing. If you think leasing could be for you, why not jump over to our leasing comparison engine and take a look at what the market has to offer.
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