Contract Hire Specialist

What is the difference between a stockbroker and a pigeon?
The pigeon is the one that leaves a deposit on the Ferrari!

Seriously though, the car manufacturing industry has by the sheer power of advertisement reconfigured the basic meaning of a simple word – Deposit.
‘Deposit’ nowadays means different things depending on the context in which it is used.

If you are renting a house, a deposit will usually consist of a couple or three months rent paid upfront that is either refundable at the end of the term or can be used in lieu of rent for the final two months of the rental agreement (usualy the former).

For Hire Purchase where one ends up owning an asset at the end of the contract, a deposit will usually entail a 10% down payment of the full value of the asset followed by x amount of payments.
So far – so straighforward.
In Contract Hire and Leasing, a “deposit” is somehting entirely different. If for example, you take out a 3 year contract you would expect to pay 36 monthly payments. 12×3=36.
The pricing matrix however of your regular Contract Hire agreement is a 3 month ‘deposit’ followed by 35 payments. At times it can also be a 6 month ‘deposit’ followed by 35 payments.

If you explicitly ask for a 1 month ‘deposit’ followed by 35 payments you will get it, but the default agreement is 3 months followed by 35, also known as “3 by 35″.
The reasoning (note that I did not use the word logic) behind this structure is that a larger upfront payment mitigates and shrinks the monthly payments.

In my view, so would putting £10,000 upfront lower the monthly payments. When all is said and done, if the initial payment is not refundable or is being used as a top-up to the monthly rentals then it does not look, smell or behave like a deposit.

It surely looks good on paper being able to advertise £199.99+VAT per month for a Ferrari but to me the pigeon seems to be the one who is more honest.

The following is a true story with a couple of details changed slightly to protect the privacy of the individual:

Maureen is looking for a car. Nothing extraordinary there as it happens every day, all day.

What sets Maureen apart is that she is slightly disabled and as such requires an automatic car that does not require much effort to get in and out of. What’s more, she needs room for her two children, pet and her partner.

Maureen is a clued up and educated consumer, precisely the type Mustard Leasing is keen to do business with. She has set for herself a realistic budget, knows exactly what she needs but keeps her mind open for alternative options – which is why she contacted a vehicle and finance broker.

She prefers a three year contract but though originally requested that maintenance be included as a monthly add-on cost, she will consider sorting out the maintenance at her local garage as this will save her a tidy sum over the term of the contract.

She is keen to drive a new car but will also look at a used car, low mileage options that are still well within the manufacturer’s warranty schedule. Our specialist second hand dealers will only sell legitimate cars and what you get is exactly what it says on the tin.
The recent plunge in value in the second hand car market is currently delivering astounding value for money.

Two weeks and five vehicle suggestions later she is the proud owner of (shock-horror) a family car 57 plate with 54+ thousand miles on the clock.

An SOB, slickmaister had done a royal job on her and unloaded an automatic VW for nearly £10,000!

The manufacturer’s warranty will run out in 6 months’ time and with the relatively large mileage she will be looking at perodic maintenance schedules which she has not budgeted for. And this is assuming the vehicle sold is the one advertised.

No doubt, she has also purchased the dealers extended warranty but Maureen will probably be surprised when it carries all sorts of caveats that makes the Warranty all but useless.

We did offer her our almost impossible to beat Hire Purchase finance, but the above SOB slickmaister talked Maureen out of it and sold her their finance package as well. Monthly figures are easy to massage and the dealer can always throw in a ‘facility fee’.

I feel bad. Not only because our company has lost an educated and informed prospect, but I feel bad for what Maureen will experience. It is going to be painful.

Rather than enjoying her family whilst in the car, she will be looking forward to a maintenance intensive vehicle and a depleted savings account. At the end of her contract she will be left with a depreciated asset and a big headache.

It has been proven scientifcally that 80% of people are visual and hence their weakness when entering a dealership as opposed to visiting a reputable, online contract hire specialist.

Nonetheless, not all is lost. If this story can serve as a ‘teacheable moment’ and encourage others to shop around and not be taken in by a slickmaister, then Maureen will have at least done some good.