Business Contract Hire
A simple and cost effective way to fund any number of vehicles
Business Contract Hire or BCH is, for many, an affordable and easy way to fund one or more vehicles from new.
Known by other terms such as an Operating Lease, Contract Hire is the flexible, popular long-term rental agreement that allows for companies and businesses to fund their cars and/or commercial vehicles. Ranging in length from between 12 to 60 months, these agreements are personalised to suit the requirements of individual businesses.
Advantages that Contract Hire provides:
- Accurate monthly budgeting
- Fixed interest rates
- Reduced administration
- Minimum capital expenditure
- Improved cash flow
- Optional breakdown rescue cover
- Rentals can be offset against the businesses profits. Cars with a CO2 output above 130g/km are currently subject to a 15% disallowance on the amount of the rental that can be claimed against the businesses taxation, for contract-hired cars with a CO2 output of 130g/km or below, there is currently no disallowance.
- Optional maintenance package
- On-going advice and support
- Road Fund Licence provided (vehicle excise duty paid) for duration of contract
- Optional GAP insurance which provides cover for the shortfall between the outstanding finance and the insurance value if the vehicle is declared a write-off by your insurance company
- Optional replacement vehicle cover in event of breakdow
Although there are many advantages, Contract Hire does have it’s disadvantages too. These include:
- You must look after the vehicle and return it in a well-maintained condition otherwise you will be charged for any damage over and above that stated in the BVRLA 'Fair Wear and Tear Guide'
- You must have fully comprehensive vehicle insurance
- Early termination can be expensive
- You will never own the vehicle as there is no option to buy it
- Excess Mileage charges will occur if you do more miles than stated in your contract.
BCH can often be the perfect solution for your business, however it isn’t suited to every single business out there. At Cort Vehicle Contracts Ltd, we discuss all aspects of the leasing process with you to determine the best solution for you.
More Information on Business Contract Hire:
As VAT on the original purchase is reclaimed by the Contract Hire Company, you only pay for depreciation and interest, rather than the full cost of the vehicle and interest. Therefore, monthly rental amounts are lower and more affordable for businesses. For companies who are VAT registered, BCH is a very astute, risk free and popular way to lease a vehicle(s) as 50% of the VAT can be claimed back on cars and in most cases 100% of the VAT on the finance element can be reclaimed for commercial vehicles (subject to not being on the Flat Rate VAT Scheme, no private use and no exempt turnover).
Where maintained contracts are concerned, the VAT on the service element is completely reclaimable, 100%. The future value of the vehicle, together with the risks associated with vehicle ownership are eliminated when leasing, especially under a maintained contract so aspects such as disposal worries, depreciation and unavoidable occurrences such as flat tyres, windscreen chips and regular maintenance are all covered by the funder.
Contract Hire has many benefits, not just offering peace of mind and the ease of handing the vehicle back after the contract ends. It can act towards improving your gearing ratio (assets to borrowing ratio) by being generally ‘off balance sheet funding’. Ultimately this may improve your businesses borrowing abilities in the future.