Planning about leasing a vehicle? Well, when people talk or plan about leasing a car or van, they generally tend to talk mainly about contract hire. This is because contract hire is one of the most common and popular lease agreements.
Contract hire is a vehicle leasing finance option which is available to sole traders, partnerships and limited companies, it is very popular with VAT registered companies because they are able to claim back 50% of the VAT on cars and 100% on vans. This is also a very good option for them (VAT registered companies), who do not wish to show their vehicles as an asset on their balance sheet.
Contract Hire represents an agreement between the two parties to lease a vehicle (car or van) for a set time period (and mileage) at a fixed monthly cost. It is also an advantage that you no longer have to worry about the residual value of the vehicle as this is all factored into the monthly rate.
The reason why this is so popular with businesses is because it allows the company to focus on their operations without having to think about the financial risk of owning vehicles.
For a business, contract hire removes most of the risk of operating company vehicles. The major risk of disposal of the vehicles at the end of contract and changes in used motor values is borne by the leasing company.
There is a known, fixed monthly cost which makes budgeting straightforward. This helps reduce impact on cash-flow which can be invested elsewhere in the business or used for other purposes. There are also a number of tax implications surrounding business vehicle leasing. Businesses need to understand these to derive the maximum benefit from the agreement.
Contract hire gives you a fixed monthly cost that makes budgeting easy and it removes the cost of a van from the company’s books. It can also help free up vital capital by lowering the company’s outgoings because contract hire needs only a small initial outlay of money to start the deal. Most contract hire schemes include a servicing and maintenance package, so all of your routine services will be paid for. This makes it easy to budget as you will have no unexpected costs.
What’s also the good thing about having a contract hire is that you also have the freedom to change your vehicles on a regular basis; once the lease period has finished, you can choose another brand-new van or car.
If you would like a Contract Hire quote, please use our instant quotation system.