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Business Contract Hire

A highly cost effective and budgetable agreement.

Business Contract Hire or Business Lease is a lease contract which can range from a contract length of 28 days to 60 months and can be tailored to suit all businesses.

Advantages:

  • No need for any large cash outlays
  • Enables a fixed monthly cost to be budgeted for
  • Limits external cash flow
  • Monthly costs can generally be allowed against any profits a business may make. Vehicle models which have a CO2 figure over the 130g/km will be subjected to a 15% dis allowance on the portion of rental to be claimed against a businesses tax amounts. For contract hire or leased vehicles with a CO2 figure of 130g/km or below, there is currently no dis allowance.
  • Lower administration costs and time
  • Fully included Road Tax for the contract or lease duration – auto issue
  • Maintenance packages can be included for all servicing, maintenance and / or tyres
  • Inclusive breakdown cover
  • Relief vehicles

Disadvantages:

  • Cancellation penalties can be high if termination is required
  • Contracts or Leases are based on pre-agreed mileage limits if these are exceeded additional costs may be charged.
  • Vehicles must be looked after and any damage found on vehicle return – over and above fair wear and tear guidelines may be charged for.
  • There is no option to directly purchase the vehicle at the end of the contract.

Additional advice on Business Contract Hire:

The owner of the vehicle (contract hire company) owns the vehicle as a business asset and can claim VAT back on the purchase and then passes rentals to you which are also subject to VAT. Contract Hire and Business leasing are popular with VAT registered businesses as they can mostly claim up to 50% of the hire cost of the vehicle back and 100% of the maintenance element on motor cars. On Commercial vehicles the figure is usually 100% depending on any private usage and VAT scheme.

With Contract Hire or Vehicle leasing is that rentals are fixed as the disposal price has been pre-agreed and not the responsibility of the customer. Contract Hire or Leasing is usually categorised as ‘off balance sheet funding’ (subject to legislation change) meaning it usually does not affect your companies gearing.

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