Contract hire is the most popular form of car and van leasing in the UK and is available for both businesses and private individuals. Business Contract Hire is particularly popular with VAT registered companies as they can claim back 100% of the VAT on vans and 50% on cars.
How does Contract Hire work?
You choose which new van or car you would like and how you long you would like to keep it and how many miles you expect to be doing on an annual basis. You choose how much deposit you are looking to pay (typically between three and nine monthly rentals) and then all of this is used to calculate the monthly cost of leasing the vehicle. The higher the upfront deposit, the lower your monthly rentals will be.
Following the deposit, you will pay fixed monthly rentals for the remainder of the contract and at the end of the contract you simply hand the vehicle back to the finance company. If the vehicle is in a good condition and you have not exceeded the prior agreed mileage, then there will be no further charges, however you will be liable for any damages which are not constituted as fair wear and tear for the term and charged a fixed cost for every mile you travel over the pre specified mileage.
How long can I Contract Hire a vehicle for?
Contract Hire allows you to lease or essentially long term rent a vehicle for a fixed period of time, this is usually two, three, four or five years, this applies to both business and personal contract hire agreements. Three year contracts are particularly popular, as there is no requirement for an MOT during the contract, you can also opt for your servicing, tyres and regular maintenance costs to be covered as part of the contract for an additional monthly fee.
How much mileage can I do?
As mentioned previously you select your projected mileage at the start of the contract, it is important you accurately forecast your mileage, as exceeding that mileage during the contract will land you with an excess mileage charge when it comes to handing the vehicle back. Annual mileage options range from a minimum of 5000 miles to a maximum of 50000 miles per year. As you are essentially paying for the depreciation of the vehicle, the higher the mileage that you opt for, the higher your monthly rentals will be.
What if I want to own the vehicle at the end of the contract?
Unfortunately, this is not possible with contract hire, the vehicle is the property of the finance company throughout the agreement. If you wish to own the vehicle at the end of the contract, then you will more than likely be looking for hire purchase.
What is Business Contract Hire (BCH)?
Business Contract Hire as the name suggests allows businesses to lease your vehicle in the way described above, over a fixed period with an initial deposit, agreed annual mileage and fixed monthly payments. It is subject to VAT, which is fully reclaimable on vans and 50% reclaimable on cars if you are VAT registered.
What is Personal Contract Hire (PCH)?
Personal Contract Hire works the same as Business Contract Hire, but the contract is between the private individual and the leasing company. The only difference between the two is that the VAT is not reclaimable.
All vehicle finance applications and subject to a credit check.
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