Key Considerations

The key features of contract hire
  • The lender (finance provider) remains the owner of the vehicle, meaning the vehicle appears ‘off the balance sheet’ of your company
  • Fixed monthly rentals cover the rental of the vehicle, plus any maintenance options if you choose a maintenance package
  • The monthly rentals are calculated by taking the following into consideration:
    • The cost of the vehicle
    • The contract period
    • The anticipated residual value of the vehicle (how much the vehicle is likely to be worth at the end of the contract)
    • The contracted mileage allowance (as chosen by you before the start of your contract)
    • Any additional options, such as a maintenance contract
  • Vehicle Road Fund Licence is provided for the full term of the contract

The key benefits of contract hire

  • A flexible and potentially low initial rental
  • Fixed rentals for the whole package, making budget planning easier
  • Flexible terms to meet your company’s requirements, with variable contract duration and mileage terms
  • Contract hire removes depreciating assets from your company’s balance sheet, and the associated risks and Resourcing of owning vehicles, such as depreciation and disposing of the vehicle
  • Maintenance of vehicles can be included in the monthly fees, spreading the cost of service, maintenance and repairs
  • Flexible and digital invoice arrangements help to considerably reduce administration
  • If yours is a VAT registered company, you can claim back 50% of the VAT on the finance element and 100% of the VAT on service package payments (if chosen)

Considerations for contract hire

  • Early termination can be expensive
  • If you have exceeded your contracted mileage, an excess mileage charge will be payable, worked out on a 'pence per mile' basis as set at the start of your contract
  • You must return the vehicle in a well-maintained condition. Any damage over and above that stated in the Fair Wear and Tear Guide will be subject to additional charges
  • Vehicle must be insured with full comprehensive cover
  • You will never own the vehicle as there is no option to buy it

What happens at the end of the contract?

  • At the end of the contract, the vehicle is returned to the leasing provider, meaning you are then free to hire another vehicle or vehicles, without any financial obligation.
  • If you have exceeded your agreed mileage, an excess mileage charge will be payable, worked out on a ‘pence per mile’ basis as set at the start of your contract.
  • When returning your vehicle, it will also be assessed according to the BVRLA Fair Wear and Tear guidelines. Any damage that falls outside of these guidelines may be subject to end-of-lease penalty charges. For more information on this, visit https://www.bvrla.co.uk/fleet-services/fair-wear-and-tear.html
If you have any questions about this information, then please call the team on 0121 272 1210