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BUSINESS

 

vehicle finance

Business Contract Hire

Contract Hire, (or operating lease), is a long term car rental contract. Terms range between 1 to 5 years and are personalized to the exact needs of your business.

Advantages:

  • Minimum capital outlay
  • Interest rates that are fixed during the contract
  • Monthly budgeting which is more accurately based on your usage
  • Enhanced cash flow
  • Maintenance Package optional
  • Less administration required
  • Monthly payments can be offset against the businesses profits. Cars with a CO2 output above 130g/km are presently
    subject to a 15% disallowance on the amount of the monthly payment that can be claimed against the businesses taxation,
    for contract-hired cars with a CO2 output of 130g/km or below, there is presently no disallowance.
  • Continuing support and advice
  • Vehicle Excise Duty paid for duration of contract due to the Road fund licence being provided.
  • Optional breakdown rescue cover
  • In the event of a breakdown, optional additional vehicle cover.
  • Option of GAP insurance

Disadvantages:

  • If you choose to terminate your contract early then it can prove expensive
  • Travelling more miles than pre-specified can lead to you being charged excess mileage fees
  • You need to take care of the car and return it in a well preserved state otherwise you will be charged for any damage over
    and above that quantified in the ‘Fair Wear and Tear Guide’
  • You require fully comprehensive car insurance
  • There is no option to buy the car at the end of the contract, hence you will never own the car

More Information on Business Contract Hire:

The VAT on the original purchase is reclaimed by the finance companies. VAT registered companies really realize the benefits of contract hire as they have the capability to reclaim 50% of the VAT on the finance element for cars. The VAT on the service element is 100% recoverable with contracts including maintenance. One of the main benefits is that there are no disposal concerns as the future value is underwritten by the leasing company. Contract Hire is also commonly ‘off balance sheet funding’ (subject to legislation change) which means it can improve your gearing ratio (assets to borrowing ratio) and potentially your borrowing potential in further down the line.