What is Business Contract Hire?
Business contract hire is the ultimate way for a business to lease a car. It’s very similar to Personal Contract Hire but it’s exclusively for businesses. This is a particularly good way to lease a fleet of vehicles and has a huge amount of benefits for companies.
When a company leases a vehicle they never actually own it, the leasing company does. This means the company never has to worry about the resale value of the car. The company pays via monthly payments. They can even include a service and maintenance package for a small fee on top of the monthly price, so they don’t need to worry about any pricey repairs.
If you’re thinking about using this method for your business, you’re in the right place.
How does Business Contract Hire work?
Business contract hire allows you to lease a vehicle for a set period of time. Like previously mentioned, when anyone leases a vehicle they never actually own it.
This means it’s down to the leasing company to calculate an estimate of the cars price after the leasing period over. After the leasing company has estimated this price, they will subtract the resale price from the current price of the car. The amount remaining is how much you will have to pay over the business contract hire period.
The amount of time the car is leased for can vary depending on your needs. Typically it’s between 12 and 48 months. Drivers have to stick to a strict mileage limit which will be agreed at the beginning of the leasing period. This is because the mileage of a car directly connects to the depreciation of the vehicle. If the driver goes over the mileage limit, the company might have to pay a penalty fee.
After the leasing period is over, the company can replace the old cars with new ones, it’s really that simple.
What are the Benefits of Business Contract Hire?
There are loads of benefits of leasing a car. Companies in particular benefit from:
- Low initial payments – Usually businesses pay three months upfront, then fixed monthly payments.
- Companies can include maintenance and servicing for an additional monthly fee.
- It’s easy to replace old cars with new ones frequently.
- Road tax is included.
- The contract can be fully tailored to suit the company’s needs.
- A VAT registered company can claim 50% of the VAT on the business hire contract and 100% the VAT on maintenance.
- It’s cheap! Companies don’t have to pay for the full price of the car and the overall price broken down into small, affordable, monthly payments.