Contract Hire Guide | explanation and guide to contract hire

Contract Hire - Fixed regular rentals

Contract Hire is the ideal solution for businesses looking to run their vehicle in a way that cuts down on expense, time and paperwork.

Fixed regular rentals and the inclusion of an optional maintenance package make it easy to budget, and you don't have any worries about depreciation or disposal.

Choose the hire period that's right for your business and agree a maximum annual mileage for the vehicle.

Contract Hire gives your business the benefit of fixed cost motoring. Its a no hassle way to manage your vehicle or fleet of vehicles and with the addition of a maintenance and servicing package budgeting for the unexpected becomes even easier. Improved cash flow with lower deposits and monthly payments compared to conventional finance.

Contract hire also offers the huge benefits of off balance sheet funding, the ability to claim back a proportion of the VAT charged on the monthly rentals, if you are VAT registered.

Contract Hire - VAT Reclaim

Your business can reclaim up to 50% of the VAT on your regular rentals*.
Fixed regular rentals together with our optional maintenance package make it easier to budget.
Your business can reclaim up to 100% of the VAT on the maintenance charges*.
By avoiding an excessive initial outlay more funds stay in your business.
Your business doesn't have to worry about reselling the vehicle at the end of the agreement.

* VAT reclaim is subject to your business VAT status.

How does contract hire work

The first thing to decide with Contract Hire, is

1) How long you want to keep the vehicle,

2) How many miles per year you expect to do,

3) Whether you want to pay an additional sum to cover the necessary servicing and maintenance costs associated with the vehicle's operation.

Then after a credit check and a small deposit (usually equivalent to 3 monthly payments), your new vehicle usually gets delivered to you door. Direct debit payments usually start the following month.

At the end of your contract your car is simply collected from you, leaving you free to choose another new car without the hassle of selling or part exchanging your vehicle or negotiating discounts with vehicle dealers.

The contract hire company is responsible for the disposal of the vehicle at the
end of the contract and you do not have the right to purchase the vehicle,
however you can extend the hire if you wish.

Contract Hire Excess Mileage

N.B There is usually an excess mileage charge which is agreed at the start of the contract, charged at a pence per excess mile rate for every mile over
the agreed contract mileage.

Your agreed milage plan will usually be between 10,000 to 40,000 miles per year. Your agreed mileage and the excess mile figures will be provided on your quotation and official finance document.

It should be noted that if you think you will cover approximately 12 000 miles per annum, go for that choice, rather than going for 15,000. Remember, you will not receive a rebate if at the end of the contract if you are under your mileage limit. It may be beneficial to pay the excess mileage charge.

Should I take out a Contract Hire Maintenance Package

Included in the contract hire deal will be road tax, breakdown cover and warranty for the full contract term!

With an additional maintenance payment, associated expenses such as servicing and consumables like tyres, brake pads, will be paid for by the contract hire company. However, it is up to you to make sure that the vehicle receives its regular driver weekly checks and arrange for maintenance work to be carried out in accordance with the manufacturers guidelines.

Contract Hire for private indivduals

Personal contract hire offers most of the benefits of ownership without the hassle, in most cases you can just add the VAT to Business contract hire
prices quotes (some finance house's charge an additional doc fees for PCH)