Contract Hire
What is Contract Hire?
Contract hire provides an opportunity for VAT registered customers to gain maximum benefit from their vehicle. A vehicle is normally leased to a business or company for a set amount of time (usually between 12 and 60 months) and a set amount of mileage, at a fixed monthly rental. The monthly rental cost is calculated by the following four factors:
1. Cost of the vehicle
2. Estimated mileage incurred
3. Duration of the lease
4. Depreciation of the vehicle's value
What are the benefits of Contract Hire?
Contract Hire enables you to hire a vehicle at a fixed cost.
· 100% of VAT can be reclaimed if the car is NOT used for personal use, and 50% of VAT can still be reclaimed if personal use is required.
· Up to 100% of rentals can be offset against taxable profits.
· At the end of the contract hire term, you can return the vehicle to the finance company without having to worry about depreciation.
· Full maintenance packages are often included which will cover your vehicle for routine servicing and breakdowns.
· Costs are spread between a fixed-term, so there is no initial large cost for you to meet.
· Your vehicle can be replaced regularly so you can enjoy the benefit of driving the latest car or van.
The Advantage of Contract Hire
Contract hire is a popular choice for VAT registered companies because they don.t have to handle the administration of the vehicles, yet the vehicles will contribute to the company's assets and can be displayed on their balance sheets.
Personal Contract Hire
The principles of personal contract hire are the same as contract hire, but the agreement is for individuals who seek a monthly fixed cost for their vehicle, or who might have opted out of a company car scheme. The benefit of personal contract hire is that the scheme relieves you from the financial risks of traditional ownership. The only drawback is that VAT is included in your monthly payments, yet it is not reclaimable. Maintenance packages are usually available, or included with this type of scheme.
What is car leasing?
Leasing occurs when a customer makes an agreement with a leasing company, to lease a car for a specific period of time, usually between 18 - 48 months. A preset mileage is decided and the customer then pays a series of fixed monthly instalments to the leasing company until the end of the agreed term.
What are the benefits of car leasing?
The main benefit of leasing a car as opposed to buying a car outright is that leasing allows you to purchase a car which might otherwise be beyond your means. The payments are stretched between a series of monthly instalments, so that you can manage your finances more easily, and you don.t have a lump sum of money to pay out at any given time.
Points to consider with car leasing:
1. How much money do you want to pay out for the car on a monthly basis? This can also be determined by the length of your contract - the longer you lease a car, the smaller the payments will be.
2. What is your annual mileage? This will contribute to the estimated end value of the car you.re leasing, so make sure you get the figure as accurate as you can as it will save you money.
3. Always negotiate with your car dealer for the best price - remember that car leasing companies will usually buy their stock in large quantities, therefore they.re able to pass on better benefits to their customers.
4. Select a car which maintains its value well as this will reduce the cost of your monthly instalments.
5. Read the terms and conditions of the leasing carefully, in particular, make note of early lease termination penalties, charges for excess wear and tear of the car and modification of the car - all of these clauses might cost you more money at the end of the term if you don.t adhere to the terms.
Short term car leasing
This is a perfect solution for customers who are looking for a leasing term which is longer than 24 hours but shorter than a 2-3 year contract. A short term car lease is usually for between 3 - 12 months - some leasing companies will even allow you to obtain a 28 days roll on contract which gives you greater flexibility. Another benefit of short term car leasing is that you.ll be able to drive a new and different car every few months.
