Why Are There Additional Charges For Returning My Lease Vehicle Early?

When you enter into a lease agreement, the monthly lease costs are averaged over the total lease period. A new vehicle will depreciate at a much higher rate when it is new than when the vehicle is 3 or 4 years old. As with many contracts cancelling the contract early will incur a charge, this charge is to reflect costs that have not been recovered by the lease repayments made i.e. depreciation, or one off costs i.e. vehicle purchasing charges, vehicle sales charges, delivery charges. These charges would normally of been recovered as part of the monthly lease charge over the total lease period, however as the contract has been cancelled prior to all lease payments being made the finance company will need to charge a fee to recover this shortfall. These costs are real costs that an individual or business would of incurred if they had purchased the vehicle outright. However in addition to these costs a the finance company will also look to recover some of the income that would of been earned if the vehicle had completed its contracted term. In order for customers to be very clear from the on set of their PCH or BCH agreement early termination charges are expressed as a percentage of hire payments outstanding and will be detailed in your Hire Agreement.