Frequently Asked Questions
- What is Contract Hire?
- What is the procedure to acquire a vehicle?
- Who owns the vehicle?
- How much cash is required up front?
- Who carries the burden of depreciation on the vehicle?
- Who insures the vehicle?
- Who orders the vehicle?
- What about vehicle delivery and collection?
- Is the vehicle cost on or off the company balance sheet?
- Can the monthly payments be offset in full against Corporation Tax?
- Are there any VAT advantages to Contract Hire?
- Who pays the ongoing maintenance costs?
- Can I terminate of the contract hire agreement early?
- What options are available at the end of the agreement?
- Is there anything to pay at the end of the agreement?
Contract Hire is the businessman's simple solution for vehicle funding. This is in the form of a lease/hire, for cars or commercial vans and is available to all types of businesses. Contract hire enables Sole traders, Partnerships and Ltd Companies to acquire their vehicles without the financial risk of depreciation on what would normally be a large capital outlay. This form of hire therefore allows the release of tied up capital for more beneficial use within the company creating the optimum cash flow. For a more comprehensive view into what is contract hire? Please click here.
|Simple step by step vehicle acquisition|
|5 easy steps||Subject to|
|Request a quotation||If the quote meets your approval|
|Complete a proposal form||Application for credit approved|
|Complete a vehcile order form and return it with your initial payment||On receipt of your official order and deposit we order your vehicle|
|Complete and return contract hire agreement document||We let you know the vehicle registration as soon as we have confirmation from our supplier so you can arrange your vehicle insurance|
|We arrange for you to take delivery of your vehicle.||Your vehicle is delivered free of charge to any destination of your choice in the mainland UK|
The finance supplier owns the vehicle during the contract period. We can offer you a purchase price to buy the vehicle from us as a third party after the contract terminates.
Minimum outlay (usually equivalent to three monthly rentals) improves cash flow (Six months may be required for a new-start business).
The finance supplier owns the vehicle and therefore they take the risk and responsibility for any loss incurred relating to the residual on the value of vehicle.
The customer / user must insure the vehicle with a fully comprehensive business policy making sure all their specific uses for the vehicle are covered.
We undertake to source your vehicle from our contacts in the industry at full fleet discount, including any specific promotions/support available at the time. Should you have a local, preferred supplier, we would be happy to order the vehicle from them on your behalf assuming they could comply with our fleet discount.
We arrange free delivery and collection anywhere in the mainland UK.
Contract Hire guarantees that vehicles will be off the balance sheet. This has the following advantages:
- Reduces capital outlay
- Reduces company investment level, thereby increasing return on investment ratio this will make the company look a stronger performer in the eyes of investors, including, of course, the banks.
|For cars emitting 160g/km or less
lease rental 100% fully allowable
against lessees business
expenses regardless of cost.
|For cars emitting 161g/km or
more 85% of finance element of
lease allowable against
lessees business expenses regardless of car cost.
Commercial vehicles are not affected by this rule and the rentals are allowable in full irrespective of the cost of the vehicle. In the case of Contract Hire agreements with full maintenance the maintenance costs of the rental for cars and commercials can be offset against tax as a separate item.
Yes! If your business is VAT registered you can also claim back up to 50 percent of the VAT charged on the finance of the vehicle and up to 100 percent the VAT charged on the maintenance applicable when the vehicle is for business and private use. For vans/commercial vehicles used solely for business purposes the hirer may claim 100 percent of the VAT on both the finance and the maintenance.
If a non-maintenance contract is chosen, the customer is responsible for all routine servicing and maintenance costs under the terms of the agreement. However, the payment for the annual road fund licence is covered for the full contract period. When a full maintenance package is taken all servicing or maintenance costs are inclusive allowing the customer more time to run their business, rather than worrying about the running of vehicles.
Yes, however, contract hire is a fixed term agreement intended for a specific time-span and can therefore carry some penalty if terminated prematurely.
- Hand the vehicle back and replace it with a new one.
- Extend the contract for a further six-months, or 12 months, usually at a reduced rate.
- Ask for a purchase price to buy the vehicle as an individual through us as a third party (The Company cannot purchase the vehicle due to the tax advantages that have already been enjoyed.)
Charges are made only if the vehicle has done more miles than originally contracted to do. This is the excess pence per mile charge (ppm), which will be written on the contract hire agreement and will vary from vehicle to vehicle. To avoid this charge we encourage customers to advise us during the vehicle leasing term if they feel that more or fewer miles than originally expected are likely to be done and we will amend the contract accordingly provided there are still 6 monthly payments to go before the contract hire and leasing agreement is due to terminate .The only other charge would be if the vehicle had been damaged and not repaired.