Finance Lease versus Contract Hire

A Finance Lease transfers the majority of the “risks and rewards” of ownership to the lessee/customer.

There are two main differences between a Finance Lease and Contract Hire (also known as an Operating Lease) agreement:


A  Finance Lease can be structured with or without a balloon payment. However, a Contract Hire agreement always takes into account a residual value set by the leasing company, but this residual value is not visible to the customer nor is it their responsibility.


A Finance Lease often requires, or provides an option for, the customer to sell the car as an agent of the leasing company (lessor) at the end of the agreement. Under a Contract Hire agreement the customer will always hand back the vehicle to the lessor.