Contract Hire

Business Contract Hire

If your business is wants a comprehensive, fixed cost motoring package, in which  full usage of a new vehicle is important but ownership is not, then you business contract hire should be considered.

Business Contract Hire is essentially an operating lease, allowing you to drive a new vehicle of your choice on a fully inclusive basis. Maintenance can be included as part of the contract, leaving you with only fuel, insurance and in a small number of instances road fund licence to pay for. As you are hiring the vehicle, as opposed to buying it, at the end of the contract you simply give it back, leaving you with no disposal worries (subject to mileage and condition).

Business Contract Hire is also an extremely tax efficient method of funding a business vehicle, as rentals may be offset against taxable profits. For cars with a retail price of up to £12,000, full tax relief is available. However, where a car has a retail price in excess of this sum, tax relief is restricted in accordance with the following formula known as ‘half the excess rule’ although full relief may be claimed on any maintenance element of the rental:

Disallowed percentage of rental = 1/2 (Vehicle cost – 12,000)*100/ Vehicle Cost

If your business is VAT registered, all of the VAT payable on the rentals may be recovered where the vehicle is either a van or a car used solely for business purposes. If the vehicle is used for business and personal mileages, then 50% of the VAT payable on the rental can be recovered.

Personal Contract Hire

Personal Contract Hire is a Hiring Agreement where the vehicle remains the property of the Finance Company. The vehicle is disposed of by the Finance Company at the end of the contract. The contract is set for a period of usually between 2 & 3 years.

The contract is for a pre-determined annual mileage. The customer pays a fixed monthly rental that will always include the cost of the vehicle depreciation. For an additional Rental the customer can include the following options: -

  • All Maintenance, Service, Repairs, Tyres and Batteries*
  • Relief Vehicle provision Recovery service

*Accidental damage, driver abuse and glass breakages are normally excluded

Advantages of Personal Contract Hire

  • Fixed cost motoring: The Customer only has to bear the direct costs for fuel and vehicle insurance, plus Excess Mileage charges if the vehicle exceeds the Terminal Mileage figure
  • No responsibility for vehicle disposal
  • Small initial outlay
  • Low monthly outlay