What is Business Contract Hire and how is it Beneficial for Your Business?
One of the most popular methods of acquiring a vehicle for business use is contract hire. It provides an all-inclusive package including all the costs associated with the running of the vehicle under a fixed monthly rental. Business contract hire is available on vehicles of any make and model. The terms of the lease are highly flexible. If you are in need of a vehicle for your business, the chances of finding a lease deal that suits your exact needs are much likely.
Who is Eligible for Contract Hire?
Sole traders, limited companies and partnerships are eligible for business contract hire.
How Will Contract Hire Work for Your Business?
If you decide to lease a vehicle, you will be paying a monthly rental. The lease terms extend for a period of 24 to 48 months. At the end of the lease, the vehicle is returned to the leasing company. This eliminates the hassle of you having to bear the depreciation value and disposal of the vehicle. Contract hire allows you to solely focus on the core activities of your company. You can avoid all the financial risks and administrative burden that come along with owning a vehicle or fleet.
What are the Features of Business Contract Hire?
● The leasing provider remains the owner of the vehicle or fleet. This means that it is not a part of your company’s assets. It appears ‘off the balance sheet’.
● Fixed monthly rentals need to be paid. You can also choose to pay additional expenses for maintenance.
● The monthly rentals are calculated on the basis of the cost of the vehicle, the lease length, the anticipated residual value of the vehicle, the mileage used and any additional options that you might choose.
● For the full term of the contract, vehicle tax is provided.
What are the Benefits of Contract Hire?
● The initial rental is low.
● Fixed monthly rentals make budgeting easier andhelp to balance,as well as, maintain cash flow.
● Business contract hire is flexible. It can be tailored to meet your company’s needs. From mileage allowance to variable contract duration, you can personalize the contract.
● By leasing, you will be removing depreciating assets from your balance sheet.
● The cost can be spread by including the maintenance cost in the contract.
● You can claim back 50% of the VAT, if your company is VAT registered.
● You will be entitled to roadside assistance 24/7. In case the vehicle or fleet breaks down, the lease provider will immediately provide you with a new vehicle, so that your business does not suffer.
What Should You Keep in Mind When Leasing a Vehicle?
● If you exceed your mileage allowance, you will have to pay extra at the end of the term.
● Early termination of the lease term might prove to be expensive.
● It is mandatory that the vehicle or fleet is returned in good condition. You might be required to pay extra in case the vehicle is damaged. Do read the wear and tear guide thoroughly.
This handy guide should put you on the driver’s seat when it comes to deciding on what is best for your business. Buying would be like a huge investment. In addition, you would also have to arrange for upfront costs and deal with the depreciation value of the vehicle or fleet. If you are not up for such a huge investment at this stage, business contract hire is an excellent solution for you.