Short-Term Contract Hire

Most car leasing deals last for periods of two, three, or four years, while the benefits of daily car rental can be lost over periods in excess of a couple of months. So which option should you choose if you require a vehicle for a period of time that falls between these two car finance options?

The answer can be short-term car leasing (also known as ‘short-term contract hire’). This guide to short-term car leasing will explain how the process works and help you decide if it’s right for you.


What is short-term car leasing?

Short-term car leasing fills the void in the market between daily rentals and traditional car leasing. The average length of a short-term car leasing deal is three and 12 months, though some companies do offer rolling contracts for as little as 28 days. On, the shortest term you will find is 12 months.

Broadly, short-term car leasing works in the same manner as a traditional car leasing deal but, as the name suggests, over a shorter period.

This means that you will make payments (usually monthly) based on the difference between the value of the car at the start of the term (its retail value) and the value of the car at the end of the term (its residual value). You will also be asked to stick to a strict mileage limit which will be used by the leasing company to determine the residual value. If you exceed the mileage limit you are likely to be penalised as this will affect the vehicle’s depreciation.

At the end of the short-term car leasing period, you simply return the vehicle to the leasing company and walk away. There is no option to buy the vehicle although if you choose, you could take out another short-term car leasing deal.

What are the pros and cons of short-term car leasing?

There are many advantages to a short-term car leasing deal including:

  • Regularly update vehicles – With a short-term car leasing deal you can update the vehicle you drive, or your fleet, as regularly as every three to 12 months depending on when each leasing period expires.
  • Better vehicles – As luxury vehicles tend to hold their value comparatively well, you could find that previously unaffordable vehicles become available to you with short-term car leasing.
  • Flexible leases – Cars can be leased on rolling 28day contracts which can provide great flexibility.
  • Ideal for fluctuating requirements – If you hire staff on probationary periods or your vehicle needs differ from month to month, short-term car leasing can provide an ideal solution.
  • Fixed cost motoring – Short-term car leasing allows you to budget for the period of each lease knowing exactly what your monthly outgoings will be.
  • Optional maintenance packages available – As with long-term leases, maintenance packages can be secured.
  • Road Fund Licence – Will be incorporated into the agreement.

The downsides to short-term car leasing are the costs. Though it will generally be more cost-effective to take out a short-term car lease than a long-term daily rental, the fact is that most new cars depreciate most rapidly during their first twelve months – the length of a typical short-term car lease. Therefore, payments are unlikely to be as cost-effective as long-term deals.

That’s why it’s crucial to shop around to find the best deal. Also make sure you consider all costs – it will be necessary for you to secure your own comprehensive insurance deal, and watch out for hidden fees such as additional taxes, early termination charges, administration fees and acquisition fees.

Look for short-term car leasing deals that incorporate maintenance packages, offer low monthly payments and make sure you do not exceed the mileage limit or cause any unnecessary wear and tear.

Who is short-term car leasing right for?

Short-term car leasing is a good stop-gap for motorists while they work out alternative means of transport. It’s also well-suited to companies that have fluctuating needs.

For example, if you take on staff for probationary periods you can terminate car agreements on short notice. Furthermore, it provides freedom to change the type of vehicles in your fleet on a regular basis – so if you need a car for three months, and then require a van, you can alter your fleet accordingly.