Contract Hire

Summary

Contract hire offers an alternative way to fund company vehicles without using conventional debt. It is used exclusively for this purpose and is not really suitable for any other type of asset.  Contract Hire is a very popular way to fund company vehicles for VAT registered companies. After assessment you will have to pay an initial payment plus VAT followed by monthly instalments for the life of the agreement, usually between 24 and 60 months.  The monthly instalment will depend on the value of the vehicle, the projected value of the vehicle at the end of the agreement, and the annual mileage - the higher the mileage the higher the monthly instalment.  Contract hire agreements usually come with a surcharge applicable to any miles travelled over the agreed limit so it’s worth taking the time to work out your anticipated mileage properly.

The vehicle remains the property of the contract hire company and never becomes the property of the person or company using the vehicle.  Optional breakdown and maintenance cover ensures that the user doesn’t have to worry about these often costly aspects of vehicle ownership.  Contract hire also allows businesses to replace their fleet on a more regular basis than would have been possible if they were spending their own funds.

There are thousands of car and van contract hire companies in the UK.  

Ideal for…

Businesses seeking to regularly update company vehicles without the need for large up front deposits. Also suitable for companies who don’t need to own the vehicle at the end of the term.

Security Requirements

The item involved in the contract hire will act as security. The vehicle will remain the property of the Contract Hire company. Occasionally personal guarantees may also be required.

Advantages

  • Fixed payments allow accurate monthly budgeting.
  • No depreciation risk.
  • Minimum deposits payable.
  • Administration is reduced as the contract hire company takes care of sourcing, buying, servicing and disposing of the vehicles.
  • VAT on payments made can be reclaimed.

Disadvantages

  • You don’t own the asset.
  • You will be penalised for excess mileage and any damage to the vehicle, no matter how small.

Key UK Providers

All major car retailers
Specialists contract hire firms