Contract Hire

Contract Hire enables companies to release cash normally tied up to outright purchase vehicles, and allows low initial payments followed by fixed all-inclusive monthly rentals for service, maintenance and repairs if required. The low regular payments attributed to Contract Hire are partly due to lenders being able to reclaim the VAT on the purchase price of a vehicle, thus allowing savings to be passed on to you by way of reduced monthly rentals.

Fleet & Business sales account for 50% - 60% of the all new car market, Contract Hire has a market share of almost 45 - 50% of this market and is still rising. Contract Hire companies calculate monthly rental costs based on the original capital costs, current interest rates, future residual value's and optional equipment which is then recalculated based on the contract hire agreement required by the client such as; pre-determined period of the contract (e.g. 2yrs / 3yrs), pre-determined mileage to be covered (e.g. 10,000 / 20,000 p.a) and additional services you require such as; Service Maintenance & Repairs (SMR), Replacement Vehicle, Fleet Management etc...

At the end of the contract hire agreement the vehicle is returned to the leasing provider with no further obligation on the users behalf (subject to terms and conditions of the contract). You need to pay attention to any additional costs such as; excess mileage charges, this may be charged if you exceed the pre-determined mileage set at the start of the contract hire agreement (e.g. 10,000 / 20,000 p.a). Also, if there is any unfair wear and tear (not including accident damage) this may also be a cost, some of the best companies offer an excess of £150 or so, no charge fee but others will charge for most repairs required to bring the vehicle up to the BVRLA standards (British Vehicle & Rental Leasing Association).

Consider the benefits of Contract Hire

  • Low initial payment
  • Flexible rental pattern
  • Fixed monthly costs which can include maintenance
  • More capital available for your core business
  • Off-balance sheet borrowing
  • No depreciation risk
  • No disposal problems
  • VAT on rentals reclaimable (subject to use only 50% if private use)
  • 100% VAT on Maintenance
  • Administration & Management transferred to provider