The simplicity, low cost and perceived risk free benefits of Contract Hire are attracting a rapidly increasing number of private and business motorists to this form of vehicle acquisition. According to www.car2cover.co.uk spokesman Tom Barley, this form of vehicle financing carries a little known – yet potentially substantial financial risk for the hirer.
?Within a Contract Hire agreement, the hirer is contractually required to provide fully comprehensive insurance for the period of hire, and in the event of a write off due to accident, fire or theft, – repay the remaining rentals plus vat? said Barley.
He explains, “a motorist using a Contract Hire scheme and paying £375 per month over a 3 year period could receive a bill for £6,750.00 if their vehicle was unfortunate enough to be written off after 18 months of use. Motor dealers, brokers and Contract Hire companies arranging these agreements usually offer their customers a protection against this risk, called Finance & Contract Hire Gap Insurance – but far too many motorists decline it and do not consider the statistics.”
UK insurers write off over 500,000 vehicles every year and that statistic equates to 57 vehicles per hour every hour, adding weight to the car2cover.co.uk concern.
The car2cover.co.uk spokesperson said ?we encourage customers to ask questions of the scheme arranger about this risk and establish what their potential liability is before entering the agreement and consider carefully the protections available to them?
According to Barley ?Most dealership and Contract Hire company Gap insurances policies can only be purchased within 180 days of vehicle delivery, so to help those already in an unprotected agreement, car2cover.co.uk have launched a Finance & Contract Hire Gap Insurance that can be purchased at any time during the agreement and we have already seen a significant number of new and existing hirers taking up protection?.
The number of existing unprotected Contract Hire users is not known, but is conservatively forecast to be in the region of over half a million motorists. ?This clearly demonstrates the scale of the potential problem and the car2cover.co.uk team are keen to encourage Contract Hire users to consider their ability to repay their agreement if the worst should happen.? said Barley.
car2cover.co.uk are calling for dealers and Contract Hire scheme arrangers to provide a much clearer explanation of the risks and provide some realistic examples to enable customers to fully understand what their potential liabilities might be should the unexpected happen.
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