● Minimum capital expenditure
● Accurate monthly budgeting and improved cash flow
● Fixed interest rates
● Rentals can be offset against business profits. Cars with a CO2 output above 130g/km are currently subject to a 15% disallowance on the amount of the rental that can be claimed against the business taxation. For contract hire cars with a CO2 output of 130g/km or below, there is currently no disallowance
● Reduced administration
● Ongoing advice and support
● Road Fund Licence provided (vehicle excise duty paid) for the duration of the contract
● Optional maintenance package
● Optional breakdown rescue over
● Optional replacement vehicle cover in event of a breakdown
● Optional GAP insurance which provides cover for the shortfall between the outstanding finance and the insurance value if the vehicle is declared a write-off by your insurance company
● Early termination can be expensive
● If you do more miles than stated in your contract you will be charged excess mileage for each mile over that stated in your contract
● You must return the vehicle in a well-maintained condition. Any damage over and above stated in the ‘Fair Wear and Tear Guide’ will be charged for
● You must have fully comprehensive vehicle insurance
● You will never own the vehicle
● There is no option to buy the vehicle
More information on Business Contract Hire
Business leasing or contract hire is a popular choice for a number of businesses; from sole traders, partnerships to the largest companies and corporations.
The contract hire company reclaims the VAT on the original purchase of the vehicle. This reduces your monthly rentals, which are VAT.
VAT registered companies can claim 100% of the VAT if the car or van is only used for business. If there is some private use, 50% of the VAT may be claimed. For contracts that include additional maintenance, 100% of the service element is recoverable.
One of the major benefits is that there are no disposal worries as the future value is underwritten by the leasing company. Another benefit of contract hire or business leasing is that it is generally ‘off-balance sheet funding’ (subject to legislation change). This can help to improve your gearing ratio (assets to borrowing ratio) and your borrowing ability in the future.