What is Contract Hire?
Contract Hire is a tax efficient method of financing the use of a company car commercial vehicle. There are no depreciating assets appearing on the balance sheet, instead the costs of the financing appear as an operating lease which is a deductible expense on your P&L. Removing capital assets from the balance sheet can improve the borrowing capacity of the company.
Contract Hire frees up capital which can be put to use in the business to generate revenue.
Contract Hire is basically a rental agreement between the user and the vehicle provider for the use of a vehicle over a pre-agreed period of time. Typically all maintenance, tyres and road tax will be included.
VAT is re-claimable on the maintenance element of the rental and on the entire monthly rental in the case of commercial vehicles. Interestingly in the latter case you will be claiming vat on the interest charged making the proposition on a commercial even more attractive.
Who uses Contract Hire?
Contract Hire is the preferred choice for companies to fund new vehicles. You don’t have to have a large fleet, we actually specialise in supplying small fleets or single units to small companies and professionals individuals.
The advantages of Contract Hire
- There is no capital outlay.
- Contract Hire is cheaper than lease purchase.
- Vehicles can be changed more often, ideally within manufacturer’s warranty periods, therefore eliminating any unaccounted for and unexpected costs.
- The risk of vehicle residual value is taken out of the equation. No need to worry where the market will be when cars are being changed.
- Ideally suited to this environment as you can absolutely fix your entire motoring costs per month over the term, therefore facilitating very accurate budgeting and forecasting.
- One single monthly outlay facilitates very predictable and regular cash flow forecasting.
- No administrative burden as all motor tax, servicing etc. is taken care of.
- Terms available over two, three or four years.