What is Business Contract Hire?
A simple and cost-effective way to fund any number of vehicles for work, which includes cars as well as vans.
Contract Hire, sometimes referred to as an Operating Lease, is a long term rental agreement. Contracts range from 12 to 60 months and are tailored to the businesses requirements.
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Advantages:
- Minimum capital expenditure
- Accurate monthly budgeting
- Improved cash flow
- Rentals can be offset against the businesses profits
- On-going advice and support
- Road Fund Licence provided (vehicle excise duty paid) for the duration of the contract
- Optional maintenance package
- Optional breakdown rescue cover
- Optional replacement vehicle cover in event of a breakdown
Disadvantages:
- Early termination can be expensive
- If you do more miles than stated in your contract you will be charged excess mileage for each mile over that stated in your contract
- You must look after the vehicle and return it in a well-maintained condition otherwise you will be charged for any damage over and above that stated in the ‘Fair Wear and Tear Guide’
- You must have fully comprehensive vehicle insurance
- You will never own the vehicle as there is no option to buy it
More Information on Business Contract Hire:
The Contract Hire Company reclaims the VAT on the original purchase, which reduces your monthly rentals (which are + VAT). Contract Hire is a very popular choice for VAT registered companies as they can claim back 50% of the VAT on the finance element for cars and generally 100% for commercials (subject to no private use, no exempt turnover and not being on the Flat Rate VAT Scheme).
On contracts with maintenance the VAT on the service element is 100% recoverable. One of the major benefits is that there are no disposal worries as the future value is underwritten by the leasing company.
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