Fiat Financial Services is offering an innovative 24-month
contract hire deal for consumers on the Fiat 500 model series. The
cost is set at £152 per month, or exactly £5 per day. In many
respects the deal is comparable with standard contract hire
facilities in the fleet market.
Where this option is taken up, the car must be returned to the
dealer at the end of the hire period. There is no continuation
option. The residual value (RV) is fully underwritten by Fiat,
subject to certain return conditions in respect of mileage and
damage exceeding normal wear and tear.
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A conventional PCP alternative under Fiat’s i-deal brand, where
the customer has the option to retain the car subject to a balloon
payment, or to return it, after making payments for 36 months is
available on the same models. The monthly costs under contract hire
and PCP will be at very similar levels, although other aspects of
the alternative deals will of course be very divergent. The PCP
deal is broadly typical of the market, with a 10 per cent minimum
deposit, and it is likely that most of those taking this
conventional option will choose to keep the car after three years
if the contract has not been terminated or settled early.
Fiat’s current PCP illustrations, based on a 10 per cent
deposit, a 9.9 per cent APR and optional balloon payments in the
range of 40-45 per cent of list price, show monthly repayments of
around £146 for the standard 1.2 litre variant of the 500 model, or
£162 for enhanced versions, compared with the fixed £152 per month
of the contract hire option.
Fiat dealerships are not yet offering service-inclusive contract
hire deals for consumers. The possibility of moving in this
direction will nevertheless be considered by Fiat for the
future.
Legal implications
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By GlobalDataConsumer contract hire has interesting regulatory implications.
As a pure hire agreement, the contract will be rather less
extensively regulated under the Consumer Credit Acts of 1974 and
2006, compared with credit agreements such as PCP and other
variations of HP or conditional sale. The return conditions,
however, will be more constrained by law compared with conventional
contract hire facilities on business cars, since consumers are
protected by the Unfair Terms in Consumer Contracts
Regulations.
Contract hire rentals will be fully subject to VAT. This
contrasts with the position under the conventional consumer finance
products where the credit charges are VAT-exempt and the customer
pays the VAT on the car’s selling price. The VAT factor is probably
the main reason why pure consumer hire contracts have not taken
root in the past beyond the daily rental sector; but in the case of
a two-year deal with guaranteed RVs the VAT disadvantage may not be
significant.
A Fiat spokesman said: “It is still too early to assess the
take-up of the consumer contract hire deal since it was first
offered from January 21 this year.”
Andy Thompson
Motor Finance Issue: 43 – May 08
Published for the web: May 27 08 12:32
Last Updated: May 27 08 12:35
