Personal Contract Hire
Personal contract hire is contract hire for private individuals. This is a very common form of car leasing and more often than not, this is what people mean when they refer to contract hire.
The car is leased for a predetermined period by the individual and although it is held in their possession the car is not actually owned by them. To all intents and purposes, they are purchasing the usage of the car for that period rather than purchasing the car itself.
At the end of the contract period, the individual can simply walk away by returning the car to the leasing company. It is also usually possible to take on a new personal contract hire term for the vehicle.
In determining the amount of the payments, the leasing company will take into account the initial cost of the vehicle and the expected value at the end of the contract to account for depreciation and the effect of mileage/wear and tear on the vehicle. The repayments essentially cover the cost of funding this difference.
The actual value at the end of the contract does not have any bearing on the repayments or the ability to hand to car back without additional penalty.