Contract Hire

What is Contract Hire? Contract Hire is vehicle finance option where the vehicle is hired for a set period of time and then handed back at the end of the agreed term.

Where do I start? The first thing to do is decide which vehicle you want to lease. Then shop around for the best quote, there are websites such as www.contracthire.co.uk. Comparison sites are also helpful.

Is a deposit payable? An initial payment equivalent to 3 monthly payments is normal for most contracts.  However this can usually be increased to achieve a lower monthly rental.

Do I own the car? No, the contract is on a hire basis, at the end of the term you return the vehicle or extend the lease period.

Will the vehicle be taxed? Generally you will find that vehicles come with annual road fund license as standard for the contract duration.

Will the vehicle be insured? No, the company or individual taking out the lease is responsible for the vehicle’s insurance. 

Who services the vehicle? This can vary depending on the contract; you can take out a maintenance agreement which generally covers all servicing, tyres, brakes, exhaust, battery and labour. This will incur an additional amount on your monthly payments.

Will the vehicle have a warranty? Vehicles will have a full UK manufacturer’s warranty.

How do I get the vehicle? Most companies will deliver the vehicle to your business or work address.

Can I use Contract Hire if I don’t have a business? Yes, Personal Leasing offers are available through most companies.

Is Contract Hire cheaper for a business than a private individual? Generally the prices will be the same although they may appear different as Personal Contract Hire prices will include VAT whereas Business Contract Hire prices will not.

How long does the contract last? This depends on the contract you take out. Most Contract Hire companies offer contracts for 18, 24, 36, 48 & 60 months as standard.

Can I put my private number plate on the vehicle? You can use your own private plate on most Contract Hire vehicles as long as you follow the necessary procedures. Check with the company you use before you take out the contract though.

Where does the vehicle come from? Vehicles generally come directly from the manufacturer via their dealer network.

How many miles am I allowed to drive? This depends on the agreement you take out with the Contract Hire company.

What if I exceed the agreed mileage? If you exceed the agreed mileage there will usually be an additional fee at the end of the term which will be calculated by multiplying each additional mile by an amount which will be stated in your contract. 

Why is there a mileage restriction? Mileage affects the future value of a vehicle and it is the value of a vehicle that determines the monthly contract hire charges. If by the end of the term you have exceeded the mileage you initially agreed the vehicle will be worth less than originally predicted.

Can I change the mileage restriction part way through the agreed term? In 99% of cases the answer is yes, although it may depend on the type of contract that you originally agree to.

What if I breakdown? Is assistance included in my monthly fees? Most Contract Hire companies offer the option to include breakdown and road side assistance as part of your regular monthly payment if not already covered by the manufacturer’s warranty.

Can I swap the vehicle part way through the agreed term? Changing your vehicle before the contract expires is often possible; however if this is the case you will usually be asked to sign a new contract and may incur an early settlement fee.

Can I end the Contract Hire agreement early? Usually yes, there will however be a charge for terminating the agreement early. This is calculated by multiplying the remaining months by an amount which will be stated in your contract.

Can I purchase the vehicle? With Business Contract Hire the driver but not the company can purchase the vehicle at the end of the term. For Personal Contract Hire yes, you may purchase the vehicle at the end of the term.

What happens at the end of the agreement? You simply hand the vehicle back to us. Alternatively you can extend the agreement for a further period or buy the vehicle if applicable.

What if there is any damage to the vehicle at the end of the agreement? You will be expected to repair any item that is not deemed to be fair wear and tear or opt to allow the finance company to do it and charge you accordingly.

What is fair wear and tear? Fair wear and tear is an industry standard term and defines the cosmetic impact of general usage as opposed to a fault that should be fixed before the vehicle can be resold.  A guide to fair wear and tear is available from the British Vehicle Renting and Leasing Association.

Can I claim VAT back on my monthly payments? Yes, VAT registered businesses can claim 50% of the VAT back and if the vehicles are commercial vehicles or cars only used for business use (no home to business driving) then you can claim 100% of the VAT on your monthly payments.

Can my monthly payments be offset against corporation tax? Up to 100% of your monthly payments can be offset against corporation tax & will be determined by the vehicle’s CO2 rating.

How will the depreciation of the vehicle affect me? It won’t since you do not own the vehicle; it only affects the finance company as they have calculated your monthly fees taking their predictions of depreciation, mileage, condition etc into consideration.  

Does the cost of the vehicle appear on or off the company balance sheets? The reason so many companies use contract hire for their company vehicles is that the cost does not appear on the balance sheets. This means that the vehicles do not show as an asset therefore freeing funds.

Are there any hidden costs? There shouldn’t be! However if you exceed the agreed mileage or hand the vehicle back with damage not classed as fair wear or tear there will be additional fees. These aren’t strictly hidden fees though as this will all be very clear in the agreement you originally took out.

Copyright 2009