What is Contract Hire?

Contract Hire is an agreement to lease a vehicle (car or van) for a set time period (and mileage) at a fixed monthly cost. The monthly Contract Hire rental amount is based upon the original cost of the vehicle, the mileage that is to be covered and the Contract Hire rental period (for example 24 months). An allowance for depreciation is also factored in to the final Contract Hire monthly cost. Maintenance packages can often be included within a Contract Hire agreement but these are not obligatory. Such Contract Hire maintenance packages would typically provide cover for all car or van servicing within the period of the Contract Hire agreement. Contract Hire agreements are usually preferred by vat registered companies,sole traders and partnerships.

bullet pointNo depreciation risks.
bullet pointNo disposal issues/costs.
bullet pointOff balance sheet funding.
bullet point100% vat recoverable if sole business use applies, 50% vat reclaimable if business/private use applies.
bullet pointRoad fund licence is included for the term of the contract.
bullet pointOption to include maintenance for the contract term.

What are the advantages of Contract Hire?

Contract Hire offers many advantages, especially for vat registered companies who do not wish to show their vehicles as an asset on their balance sheet.

Contract Hire allows the company to reclaim 50% of the vat on cars and 100% of the vat on vans of the Contract Hire monthly payments and 100% of the vat on any maintenance package. There are also certain tax allowances that can be utilised with Contract Hire.

With Contract Hire you no longer have to worry about the residual value of the vehicle as this is all factored into the Contract Hire quote.

There is no large initial capital outlay with Contract Hire because as your payments are evenly spread out over an agreed period (detailed in your Contract Hire quote).

Contract Hire gives you the freedom to change your cars or vans on a regular basis thus allowing you to take advantage of the latest technological developments in fuel efficiency and safety.

Finally, Contract Hire gives you peace of mind with fixed cost motoring.

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