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Contract Hire and Leasing Guide

Business Contract Hire
All Vehicle Contracts Contract Hire and Leasing Guide - Business Contract Hire
  • Contract Hire for Business.

    Firstly, let’s take a closer look and see if it’s suitable for your requirements. Contract Hire is now the business users most preferred option to acquire a new vehicle, suitable for all types of small and large companies and partnerships that are VAT registered. If you fall into this category, then choosing Contract Hire could be just what you’re looking for.

    To make life as simple as possible, the All Vehicle Contracts website helps you choose and compare which vehicle and Contract Hire deal is right for you. Interactive quotation options and full vehicle comparisons, including whole life costs on virtually any make, model or manufacturer, are available for you to explore and compare on line.

    Due to cost savings and the many benefits Contract Hire has to offer, it is little wonder that it is the most preferred option of vehicle acquisition, with over 60% of vehicles now being obtained by some form of Contract Hire or Leasing scheme.

    So why choose Contract Hire?
    • Affordable, fixed cost motoring that can be tailored to suit your monthly budget and annual mileage, making budgeting easier and straightforward
    • Fixed repayments over a period and on the exact vehicle that suits you
    • Low initial outlay - Contract Hire allows you to choose your own initial payment and contract term which are usually between 24-60 months
    • Savings for VAT registered customers - 50% of the VAT is reclaimable on the monthly rental, with 100% reclaimable on the service and maintenance element
    • Servicing and maintenance packages can be included if required, combining a full service and maintenance option, that offers fixed monthly budgeting and takes care of all your motoring costs, with the exception of fuel and insurance
    Contract Hire - what does it mean?

    Contract Hire is exactly what the name suggests. It is an agreement to hire a vehicle over a fixed term with an annual mileage limit.

    Contract Hire - what is the typical period?

    Contract Hire is usually set for periods of between 24-60 months, and in some instances 12 and 18 month contract periods may be quoted.

    Contract Hire - what is the typical initial payment?

    Contract Hire initial payments are normally calculated in months from 1-month in advance up to 6 or in some instances 9-months in advance. Of course the higher the initial payment, the lower the monthly payment, therefore it is important to check advertised prices and compare like for like initial payments.

    Contract Hire - what are the contract profiles?

    Contract Hire payment profiles consist of an initial payment, and fixed, spread monthly payments based on the initial payment amount for the duration of the contract, or a with a terminal pause.

    Jargon explained
    • Spread rental - Contract Hire example, 3 years, 6 followed by 35, you will be paying a total of 41 payments. A spread rental agreement summarizes the first payment as 1 rental although it equates to six payments, hence the terminology spread rental.
    • Terminal pause - Contract Hire example, 3 years, 3 followed by 33, you will be paying a total of 36 payments. A terminal pause rental agreement summarizes the first payment as 1 rental with a pause of 2 months at the close of the contract agreement; it equates to 36 payments with a 2 month holiday pause at the end of the agreement, hence the terminology Terminal pause.
    What happens at the end of the Contract Hire term?

    Under the terms of a Contract Hire agreement, the vehicle is handed back at the end of the term. Under the terms of the contract agreement, there is an obligation to make the vehicle available at the end of the term for inspection.  Of course it is impossible to return a vehicle without acceptable fair wear and tear such as small stone chips, and light scratches. Please click the following links that refer to fair wear and tear guide, and vehicle hand-back procedures.

    What happens if I want to end the Contract Hire agreement?

    Early settlement terms and conditions are detailed on the agreement, the norm is that no rebates are due if you wish to hand the vehicle back under 12 months into the agreement. After 12 months, settlement rebates may be available, they are often between 20 and 50% discount on outstanding rentals, plus outstanding excess mileage.  Please refer to your agreement prior to signing as early termination can prove costly.  

    What happens if I go over the agreed contract mileage?

    Under the terms of a Contract Hire agreement, there will be an excess mileage clause, which documents excess mileage from the outset. This is charged at a pence per mile. If you settle the agreement early, mileage is aggregated and calculated accordingly. If you go under the mileage, there is no refund unless you have a pooled mileage agreement which usually only applies to vehicle fleets of 5 or more.

    How does Contract Hire work?

    To find out exactly how Contract Hire works, simply choose your vehicle model and configure your own quote. All vehicles are available to quote on Contract Hire, with all the relevant information needed to gain a full understanding, with the option to explore company car Benefit in Kind taxation and whole life running costs.

    The All Vehicle Contracts website brings you and your business vehicle or fleet together with a fully interactive and cost effective Contract Hire quotation, which includes all you need to prepare your very own instant online Contract Hire quotation, allowing you to choose the ideal vehicle and profile that suits you.

    Contract Hire or Leasing - which is the correct terminology?

    Contract Hire may be referred to as Leasing, whilst this is a popular reference, a vehicle leasing agreement is not the same as Contract Hire, there are key differences.

    Vehicle Lease agreements in the U.K. are usually subject to a residual value, where the lessee (the person who leases the vehicle) is responsible to the Lessor (the owner/Finance Company) for the residual value amount.

    Alternatively, there may be what is termed as fully amortized, which is where the asset value is written down to a nominal figure over the lease period.

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