When you reach the end of a vehicle contract then, depending on the type of contract, you will have options for what you can do with the vehicle.
Leasing/Contract Hire/Personal Contract Hire (PCH)
At the end of a business or personal contract hire agreement you will have to return the vehicle, though you may be able to request an extension of the contract with the hire company's permission (for example, where your next vehicle won't arrive in time).
Extending the contract
With the hire company's permission you may be allowed to extend the contract for a either a fixed period (e.g. 1 month) or a fixed mileage (e.g. a further 1,000 miles).
The hire company may wish to inspect the vehicle before agreeing to an extension and may impose special terms for the extension, but if the hire company refuses an extension you will have to return the vehicle anyway.
You may also be required to arrange for any necessary vehicle bodywork or mechanical repairs to be completed before starting the extension period (see below).
Returning the vehicle
If you are returning the vehicle at the end of the contract then you should arrange with the hire company to have the vehicle inspected around 3 months before the end of the contract.
This is to allow you time to arrange for any required work on the vehicle to bring it into a condition which would be appropriate for its age and mileage.
The examination of the vehicle will typically include checking that the vehicle's bodywork and interior has been kept in a condition appropriate to its age and mileage and that the vehicle has been maintained in accordance with the manufacturer's service schedule and had all appropriate recalls.
The examination of the vehicle will typically also include checking that:
- the vehicle service log book has been marked/stamped by the servicing garage;
- all keys, fobs, remote control devices, handbooks/user manuals, SatNav or other discs are present; and
- that the standard equipment, options and accessories supplied with the car are present and in working order.
Finance and contract hire companies do not require a returned car to be in showroom condition; they allow a degree of wear and tear to the vehicle that is in keeping with the age and mileage of the vehicle at the end of the contract.
Reputable finance and contract hire companies will usually adhere to the BVRLA 'Fair Wear And Tear' Guidelines. These set out the type of marking and damage that is acceptable for a returned vehicle.
You should request a copy of the guidelines from your finance company when you arrange to have the vehicle inspected so you understand what to expect in the vehicle inspector's report.
If your vehicle doesn't meet the required condition standard then you will need to arrange for any excessive wear and tear or other deficiencies to be rectified.
Repairs should be arranged through a reputable vehicle repairer or garage to ensure that the work is completed to a standard that will be accepted by the finance/contract hire company at the end of the contract.
In particular, you should ensure that the repairs do not void any of the manufacturer's warranties for the vehicle.
You should ensure that the vehicle is clean inside and out prior to the inspector's arrival and that you have allowed enough time for you to be present throughout (if you wish to be there).
You should also make sure that the inspector has sufficient daylight time to see the vehicle and, if possible, that it is somewhere dry.
Vehicle inspector's are usually willing to explain their findings to you, but you should not enter into a debate or argument with them about whether or not particular issues do or don't meet the condition requirements. The inspector's job is simply to record the facts about the condition of your vehicle.
The inspector may take photographs of the vehicle, measurements of damage and may record comments about the vehicle but this is entirely normal and helps him/her record and accurate representation of the vehicle's condition.
If the vehicle has travelled more than the agreed mileage for the contract hire agreement then you will normally be required to pay an excess mileage charge. The charge per mile will have been notified to you prior to the start of the contract.
Excessive wear and tear
If the vehicle condition is worse than might be expected for the agreed contract age and mileage then you may be charged for:
- correcting the excessive wear and tear; or
- the lower price that the hire company will obtain when it sells the vehicle compared to what would have been the sale price of a vehicle in the correct condition.
The contract hire company is not obliged to repair any excess wear and tear even if you are charged for it.
Contract Purchase/Personal Contract Purchase (PCP)
In a business or personal contract purchase agreement you will usually have 4 options at the end of the contract:
- Complete the finance agreement by paying the final finance instalment or 'balloon' payment and keep the vehicle.
- Complete the finance agreement and sell the vehicle or trade it in against another vehicle.
- Hand back the vehicle (subject to age/mileage/condition requirements - see above).
- Re-finance the vehicle and keep it.
If the vehicle is worth more than the agreed final value in the contract purchase agreement (sometimes known as a 'minimum guaranteed future value' or 'MGFV'), you may be able to use the surplus value as a deposit towards a new vehicle.
Handing back the vehicle
If you choose to hand back the vehicle at the end of the agreement you will need to ensure that it meets the finance company's condition requirements (see above) and that you have the V5 registration document.
Excessive wear and tear/mileage
If the vehicle condition is worse than might be expected for the agreed contract age and mileage, or the vehicle has exceeded the agreed mileage, you may be charged for putting right the excess wear and tear or the extra mileage as explained above.