Business Contract Hire (CH) – usership not ownership

Contract Hire is available to Limited Companies, Sole Traders or Partnerships and offers the company fixed monthly budgeting with minimal outlay.

It is an extremely tax effective method of funding a business vehicle as the rentals may be offset against your taxable profits.

Additionally, if you are a VAT registered business 100% of the VAT on the monthly rentals may be reclaimed where the vehicle is either a van or a car used soley for business purposes. Where the vehicle is used for business and private mileage only 50% of VAT on rentals is recovered.

As a CH customer, what payment options do I have?

In the leasing industry the “normal” payment profile is 3 initial rentals in advance. A higher initial payment will bring the monthly payment down and a lower initial payment will higher the monthly payment.

Examples of initial payment.
If a business takes out a lease on a BMW based on a 3+35 payment profile at £350 +vat per month the total payment at the end of the lease will be £13,300 + vat (38 x £350 + vat). Some different initial payment profiles based on this example are as follows:

1. 3 Initial payments

  • Initial payment is 3 x £350 + vat = £1050 + vat
  • Monthly payment is 35 x £350 + vat
  • Total payment is 38 (3+35) x £350 + vat = £13,300 + vat

2. Initial payment of £2,000 + vat – for customers who want a lower monthly payment

  • Initial payment is £2,000 + vat
  • Monthly payment is £322.86 + vat (£13,300 + vat – £2,000 + vat / 35)
  • Total payment is £2000 + vat + (35 x £322.86 + vat) = £13,300 + vat

3. 1 initial payment – for customers who want to have a lower initial rental

  • Initial payment is 1 x £350 + vat = £350 + vat
  • Monthly payment is £370.00 + vat (£13,300 + vat – £350 + vat / 35)
  • Total payment is £350 + vat + (36 x £370 + vat) = £13,300 + vat

Please note that the above examples are just for illustration purposes and to be used as a guideline – please obtain a written quote for all different payment profiles that you require.

Benefits of Business Contract Hire

  • Fixed cost allowing easy budget management
  • Low initial outlay (usually 3 rentals in advance)
  • Supplier arranges delivery and collect of the vehicle
  • Ability to change for a brand new vehicle on a regular basis
  • No depreciation risk
  • No responsibility for vehicle disposal if returning the vehicle
  • Finance company carries the Residual Value Risk (market value of the vehicle at the end of the lease