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Business Contract Hire

Business Contract Hire

Fixed monthly costs without financial risk

The running cost of cars and light commercial vehicles is one of the biggest expenses most businesses face. Add to that the risk of depreciation, and it’s no wonder Contract Hire is such an appealing option.

Whether a customer is running a single car or a fleet of 10,000 vans, contract hire enables them to control one of their biggest expenses.

Key customer benefits:

  • The vehicle appears off ‘Balance Sheet’ as it is owned by the leasing company
  • Tailor-make your own package with bolt-on products and benefits
  • No financial risk associated with disposing of the vehicle
  • Our considerable buying power enables us to pass on the savings to our customers through low cost rental as well as highly competitive ancillary products such as maintenance, foreign travel cover and accident management
  • From April 2009, customers who lease cars with low CO2 emissions will receive an even greater tax benefit; we can certainly offer our customers the widest possible selection of vehicles with every manufacturer and model.
  • The convenience of a full maintenance service, at a fixed monthly cost, is optional.
  • Road Fund Licence is provided for the full term of the contract.
  • There is VAT recoverability at 50% for the supply of the vehicle and road tax licence (100% for commercial vehicles). There is also VAT recoverability at 100% for optional services subject to the customer’s VAT status.

Contract Hire – also known as an operating lease - is the most common type of lease available in the UK, and remains extremely popular among our customers

What is Contract Hire?

A Contract Hire agreement is an operating lease where The Leasing Company accepts responsibility at a fixed cost for depreciation, funding costs, and administration and if requested the provision of maintenance.

Contract Hire will benefit any company who are seeking to remove assets from their balance sheet, eliminate the financial risk associated with disposing of the vehicle and if desired enjoy the convenience of a full maintenance service, at a fixed monthly cost.

Contract Hire is more beneficial for VAT registered companies preferring a minimum outlay and maximum cost control.

Under Contract Hire, vehicles continue to be owned by The Leasing Company yet are hired to you for a set period of time and at a fixed monthly rate.

Road Fund License is provided for the full term of the contract.

How does it work?

The monthly rental charged is calculated based upon the cost of the vehicle, the contract period and the anticipated resale value. It takes into consideration the predicted mileage, service and maintenance costs, together with any additional services such as relief vehicles.

Under a Contract Hire agreement The Leasing Company retains ownership of the vehicle at all times and therefore continues to absorb the subsequent risks such as unforeseen running costs and uncertain resale values.

What are the key features?

(a) Excess Mileage Where an agreed mileage is exceeded during the contract hire period an excess mileage charge is payable. This is calculated on ‘pence per mile’ set at the start of the contract. Excess mileage is calculated at the end of the contract and invoiced to you.

(b) Rescheduling The original contract for a vehicle may be revised for an increase of mileage, term or addition of optional services. Where there is a change to mileage or term of a vehicle the recalculation is made from the start date of the contract resulting a revised rental.

What are the financial benefits?

(a) VAT Recoverability

The Leasing Company is able to claim back 100% of the VAT on the purchase price. The monthly rental cost is split between the finance and service elements of the lease.

Customers can claim back 50% of the VAT (100% for commercial vehicles) on the finance element of the rental* namely; road fund licence, interest cost, depreciation. Customers can claim back 100% of the VAT on the Service element of the rental* namely; maintenance, relief vehicle, service management fee, accident management. (*Subject to company VAT status)

(b) Tax Advantages

Leased company vehicles qualify for beneficial Corporation Tax treatment, as all rental payments on leased ‘business use’ vehicles (depending on CO2) are normally allowable in full for tax purposes. Similar benefits apply to leased vehicles with a CO2 (see current rules) over a certain amount subject to current tax legislation.

Any additional services such as maintenance, accident management etc. is wholly allowable against corporation tax.

What happens at the end on the Contract?

The Leasing Company offers a number of different options at the end of the contract:

Purchase - We can produce a purchase price quote on your behalf. This is subject to the funders rules, not all funders will offer a purchase price at the end of the lease.

Hand the vehicle back to The Leasing Company - should the value of the vehicle be less than the set Residual Value or you do not want hassle in disposing of the vehicle. (Regulated & Un-Regulated) You should contact us and arrange collection of the vehicle (3 working days notice is required minimum). You must ensure you receive a copy of the hand over appraisal form and ensure that excess mileage is checked. Any damage on the vehicle or missing service history, keys etc will be charged as detailed in The Leasing Company’s ‘Fair Wear & Tear Guides’ which can be provided on request.

Formal Extension - You can request (depending on which Leasing Company we use) an extension to your existing contract.