Contract Hire and Leasing - Explained

We can offer all sorts of contract hire and leasing packages to make cars more affordable, here is a selection with some explanations of their individual benefits:

Contract Hire

This is the leasing of a vehicle, normally to a vat registered business or company, for a set time and mileage at a fixed monthly rental. The monthly rental is determined by the cost of the vehicle, the period and mileage covered, as well as the anticipated value of the vehicle at the end of the contract. Maintenance packages can be included within Contract Hire agreements, but are not obligatory.

Benefits of Contract Hire

There are many benefits of contract hire, some of which are listed below:

• Contract hire offers fixed-cost motoring.
• VAT can be reclaimed on 50% of total payments made and 100% on the maintenance package costs.
• The tax benefits are excellent allowing you to claim the monthly payments against profits.
• Trade-ins and the risks of selling old vehicles are no longer an issue.
• Deposits are normally fairly small, so helping cash flow.
• Cars can be changed on a regular basis to keep them fresh and modern.

Personal Contract Hire

This, as its name suggests, is essentially the same as Contract Hire but for private individuals. If you want fixed cost motoring, or have opted out of a company car scheme then Personal Contract Hire could provide you with hassle free motoring without the residual value risks associated with traditional ownership.

VAT is built into the monthly payments, but is not reclaimable by private individuals. Maintenance packages are usually available so that you don't get any nasty surprises.

Benefits of Personal Contract Hire:

Amongst the benefits of Personal Contract Hire are:

• Low deposits.
• Road Fund License included in lease agreement.
• Full maintenance packages are also available if required.
• Fixed price motoring - you know precisely how much to budget every month.
• Hassle free - no old cars to have to sell or part exchange.

Finance Lease

Like hire purchase an agreed deposit is paid then the balance is paid over a fixed period to the lender. Like any lease, ownership does not automatically pass to the client until an "option to purchase" fee is paid at the end of the agreement. Or a "peppercorn" rental can be paid annually to retain use of the item however title still remains with the finance company. The benefits of a finance lease are that vat is charged on the rentals allowing businesses to claim this back on a monthly basis if they are VAT registered. Leasing can also benefit the business accounts depending on the structure of the business.

Short Term Contract Hire

This is an excellent option for those who are looking for a lease agreement that falls in between daily car rental and a popularly used 2 - 3 year contract.

The average length for a short term car lease is from 3 - 12 months although some leasing companies do offer rolling contracts of 28 days. There are limited models and types of cars available.

Attractions of short term car leasing

There are major benefits that short term car leasing offers over other finance methods such as Personal Contract Hire & Daily Rental. These are:

• A new or different car every 3 - 12 months.
• Car can be leased on a rolling 28 day contract offering great flexibility.
• Much cheaper than Daily Rental.

Who uses short term car leasing

Short term car leasing is often used by companies who have:

• Staff on probationary periods (normally between 3 and 6 months). This gives the employers the ability to terminate car agreements on short notice.
• Fluctuating vehicle requirements - one month an employee may need a car, the next they may need a van. Short term car leasing allows the freedom to change vehicle type several times a year.
• Part time or Temporary staff with a company.
• A stop gap while waiting for delivery of a car that you have ordered

We can also offer numerous other contract hire and leasing methods or finance to spread the cost of your new vehicle, but to list them all can be confusing and unhelpful. If you have any other preference, then please, merely ask and we will be pleased to help you.

Please contact us for more information on contract hire and leasing.

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