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Business Car Leasing: What is Business Contract Hire? – Suitability Explanation

Business Contract Hire is a straight-forward fixed term lease agreement, whereby you commit to leasing a new car or commercial vehicle for a fixed amount of time, and at the end of the agreement you simply return the vehicle to the leasing company.  It’s effectively like a “Long Term Rental”. 

The rentals are calculated based on what the leasing company buys the vehicle for at the start of the agreement, and what they expect the vehicle to be worth when you return it at the end of the contract (the “residual value”).  The different between the original purchase price and the residual value is the depreciation.

Business Contract Hire – Key Benefits Business Leasing

  • Depreciation and Disposal – Simply return the vehicle at the end of the agreement – the leasing company assumes the risk on its future value, and assumes responsibility for its disposal
  • Cashflow Friendly – Business Contract Hire requires a low initial rental of typically around 3 monthly rentals, and regular rentals are fixed for the duration of the lease. 
  • Recover VAT – If your business is VAT registered, you’ll be able to recover 50% of the VAT on the “Lease” if there is private use of the vehicle.  If it’s a commercial, then you’ll be able to recover 100% on the “Lease”.
  • Tax Relief – Incorporated businesses will be able to offset 100% of the lease rentals against Corporation Tax for cars which fall below 130g/km CO2 – and 85% for cars above 131g/km CO2.
  • Additional Credit Facility – avoid the need to invest capital or tie up bank credit and use Business Contract Hire as a way of adding vehicles to your business.
  • Peace of Mind – Road Tax is included for the duration of the agreement.  Service, Maintenance & Tyres may also be included for an additional amount, providing complete peace of mind.

Are there any disadvantages to Business Contract Hire?

  • The leasing company will retain ownership of the vehicle, so Business Contract Hire may not be suitable for your business if you are looking to own or buy a vehicle.
  • Business Contract Hire is a fixed-term lease agreement, and therefore if you might need to end the agreement early, you are likely to incur costs for Early Termination.
  • As vehicles are normally returned at the end of the agreement, you’ll need to consider how the vehicle is to be used, and whether it’s likely to suffer damage which is outside of normal fair wear & tear.  Leasing companies may charge for damage which falls outside of BVRLA Fair Wear & Tear standards.
  • If a vehicle is provided for “Private Use” through the business, then employees and Directors will be liable for “Benefit in Kind” tax.
  • Lease rentals are based on pre-determined mileage, which if exceeded will result in an excess mileage charge.  It’s sometimes possible to re-schedule an agreement part way through to take into account mileage variances.

What else do I need to know about Business Contract Hire?

  • Financial Obligations – Business Contract Hire is a fixed term agreement, so ensure you will be able to afford the rentals for the duration of the lease before you agree to go ahead.
  • Credit Approval – Your business will need to be approved for credit with one of our lenders before a lease can go ahead.  Speak with your Account Manager if you are unsure of the requirements for securing credit for your business.
  • Taking a Lease Vehicle Abroad – It’s possible to take a lease vehicle abroad, but you will need permission from the leasing company before you go, so contact us in advance for further advice.
  • Private Number Plates – It’s possible to fit a private number plate to a lease vehicle, but you must ensure it’s removed in plenty of time of return of the vehicle to avoid losing the plate at the end of the contract.
  • Hire and Reward – The lenders we work with will not permit vehicles to be used for minicab services, and there are exceptions for usage for courtesy cars or driving schools.

For further information or advice on Business Contract Hire, contact Concept Vehicle Leasing on 0800 043 2050 and the team will be happy to help.


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Our Awards & Accreditations

  • HSBC South London Business Award 2012 – Winner
  • London Business Awards 2014 – Highly Commended
  • Small Fleet Leasing Awards 2013 – Winner
  • BVRLA Leasing Broker Member Award
  • Small Fleet Leasing Federation