Business contract hire, also known as business car leasing or company car leasing, is a popular way for businesses to acquire vehicles without the upfront costs and ongoing expenses associated with purchasing and maintaining a fleet. In this article, we will define business contract hire, discuss its benefits, and provide some tips for choosing the right contract hire agreement for your company.

What is Business Contract Hire?

Business contract hire is a type of vehicle leasing agreement that allows businesses to rent a car or a fleet of cars for a fixed period, typically between 1 to 5 years. The leasing company purchases the vehicle(s) and rents them out to the business for a monthly fee. At the end of the contract period, the company returns the vehicle(s) to the leasing company, who then sell them on. The business does not own the vehicle(s) and there is no option to purchase them at the end of the contract period.

Benefits of Business Contract Hire

There are several benefits to business contract hire, including:

– Lower initial costs: With business contract hire, there is no need for a large upfront payment as the leasing company purchases the vehicle(s) and rents them out to the business for a fixed monthly fee. This helps businesses to manage cash flow and make the most of their available funds.

– Fixed monthly payments: Business contract hire offers predictable monthly payments, making it easier for businesses to budget for their vehicle expenses.

– Tax benefits: In the UK, companies can claim 50% of the VAT on their monthly payments and 100% of the VAT on maintenance costs if the vehicle(s) are used solely for business purposes.

– Flexible options: Businesses can choose from a range of vehicles and mileage options to suit their needs and budget.

Tips for Choosing the Right Business Contract Hire Agreement

When choosing a business contract hire agreement, it is important to consider the following:

– Mileage allowance: Be sure to choose a mileage allowance that is suitable for your business needs. If you exceed the allowance, you could be charged additional fees.

– Maintenance options: Consider whether you want to include maintenance costs in your monthly payments or opt for a separate maintenance package.

– Length of the contract: Choose a contract period that suits your business needs. Shorter contracts may be more flexible, but longer contracts may offer better rates.

– Residual value: Consider the residual value of the vehicle(s) at the end of the contract period. Higher residual values could result in lower monthly payments.

Conclusion

Business contract hire is a popular way for businesses to acquire vehicles without the upfront costs and long-term commitments associated with purchasing and maintaining a fleet. By choosing the right contract hire agreement, businesses can enjoy predictable monthly payments, tax benefits, and a range of flexible options to suit their needs and budget.