Contract Hire – a convenient, cost-effective and hassle-free way of financing a new vehicle.
What is Contract Hire?
Contract Hire, or Car Leasing as it is also known, is simply the hiring of a vehicle for an agreed period of time for a fixed monthly rental. Unlike Short Term Rental (1-12 months) or Daily Rental, a car lease is usually for 2-5 years, after which contract hire cars can simply be handed back with no further commitment. Alternative end-of-lease options might be to extend the vehicle leasing agreement or purchase the lease car if you wish.
How Contract Hire works
Leasing cars or vans is quite straightforward. Just select the make and model you want including any options or extras, decide how long you want the car lease or van lease to run, calculate your annual mileage, and choose whether or not to include Maintenance in the contract hire agreement. Adding Full Maintenance to your car leasing contract makes a lot of sense as all bills for repairs, tyres, servicing and parts are paid by the leasing company. Also, Road Tax is usually included for the duration of the Contract Hire, so all you have to do is insure the vehicle and put fuel in. Simple!
Benefits of Contract Hire
There are many benefits of leasing a car, which is why Contract Hire is becoming more popular every year. Not only is it cost effective and tax efficient for a business to lease a car or van rather than purchase it, but there are also many reasons why it makes sense for the private individual. Fixed monthly payments mean that it’s easy to budget for your motoring costs, and there’s a low initial outlay compared to buying a car. Also, you can have a new car every 2 or 3 years and never worry about depreciation or part-exchanging your old one.
Business Contract Hire or Personal Car Leasing?
As a Company Director, Partner or Sole Trader, you may be unsure whether Business Contract Hire or Personal Car Leasing is the most cost effective and tax efficient way of leasing cars. You should, of course, seek advice from your accountant or a reputable Contract Hire Broker about this, but it is basically down to your tax situation. This is because leasing a car through a company means you’ll be paying a Benefit in Kind tax and possibly a Car Fuel Benefit charge, and you must weigh this up against the cost of a car lease in your personal name. In addition, you may have the option of receiving a company car or car allowance (see the ‘More Information’ links at the bottom of this page).
Van Leasing is very similar to Car Leasing, and you can obtain a van lease on almost all types of vans and commercial vehicles. Van Leasing is very cost effective for businesses, particularly from a tax and VAT perspective. Why tie up valuable working capital by purchasing vehicles when a van lease only requires a small initial outlay and can cover your vehicle for all maintenance and repair eventualities?
For more information about Contract Hire and Leasing, why not check out these articles:-
Car Leasing vs Buying – Which is Best for me?
Car Leasing Benefits – Why Should I Lease a Car?
Car Leasing – 6 Steps to Leasing A Car
Business or Personal Car Leasing – Which Is Best For Me?
Company Cars – How They Affect The Tax You Pay!
Company Car Or Company Car Allowance – Which Should I Choose?
Top 10 Reasons to Lease Your Business Fleet
Don’t Be Fooled By Cheap Internet Car Leasing Offers!
The 10 Worst Mistakes People Make When Leasing A Car
Car Leasing Maintenance Contracts – Do I Need One?
Top 20 Car Leasing Frequently Asked Questions