Contract Hire is the perfect product for you if you want fixed cost motoring and are confident about the mileage and condition of your vehicle over a set period of time. It is an easy and cost effective way to fund vehicles, which would enable you to control one of your biggest expenses. Contract Hire is the most popular type of vehicle leasing. Under this kind of agreement, the vehicle is hired for a set period of time and predetermined mileage, at fixed monthly rentals. You never own the vehicle, so at the end of the contract the finance company will collect it and dispose of it. It is possible to include a maintenance package in the monthly rentals. Monthly rentals will depend on the value of the vehicle, length of the contract, and the agreed mileage.
- Low deposit typically equivalent to 3 monthly rentals
- Choice of contract period from 24 to 60 months
- Hassle free – option to add servicing and maintenance, taking away all the hassle of running a vehicle
- Fixed cost motoring
- Steady cash flow
- Free up capital – Get a new vehicle without the up-front costs, freeing up money for you to invest elsewhere in your business
- No risk – The risk of vehicle depreciation is eliminated. At the end of the contract, the vehicle is simply handed back without worrying about how much it might be worth
- Less administration – The finance company deals with all the buying, maintenance and selling issues
- Tax benefits – Reclaim up to 100% of the VAT on all maintenance charges, the lease rental the fees and finance element for commercial vehicles
- Rentals are up to 100% allowable against corporation tax
- Road Fund License is provided for the full term of the contract
- The vehicle appears off ‘Balance Sheet’ as it is owned by the leasing company
- Maintenance can be included
- You will need to estimate the time and mileage for the use of the vehicle
- No option to purchase the vehicle
- The cost to terminate the contract early can be expensive
- If you go over their agreed mileage allowance, excess mileage will be charged for each mile over that is stated in the contract
- You must look after the vehicles and return in a well maintained condition, if not you will be charged for any damage over and above as stated in the ‘Fair Wear and Tear Guide’
- This would suit customers who:
- Want a more expensive vehicle than their budget would normally allow i.e. A new vehicle instead of a used one.
- Know exactly how long they want to keep the vehicle and a good idea of the mileage they will be doing.
- Want to avoid the risk of depreciation and maintenance costs.
- Want fixed cost, stress free motoring.
- Are not worried about owning a vehicle.
- Are not VAT registered because VAT is paid on rentals rather than all upfront.