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Contract Hire and Vehicle Leasing for Business and Personal Use

How Does It Work?

When it comes to purchasing a car, few of us have the funds to buy the vehicle outright. Instead, we have a number of car financing options available to us including:

  • car loans 
  • vehicle hire purchase 
  • car leasing  
  • personal and business contract hire 
  • personal and business contract purchase 
  • finance lease

Car leasing is vastly popular in the United States, where one in four cars are leased. Now it is growing as a vehicle finance option in the UK thanks to its many advantages: not only does it offer the ability to manage a vehicle`s projected depreciation over a fixed term, but it also provides freedom from the negotiation of part-exchange prices and values as well as tax incentives for businesses.


How does car leasing work? 

Depending on whether you are a personal or business customer, there are a variety of car leasing options available to you.

Business contract car hire

Suitable for most businesses - in fact, almost 50 per cent of the UK fleet market uses this option.

  • Available on both used (up to a maximum of 12 months old) and new vehicles 
  • VAT registered businesses can reclaim 
  • 50% of the VAT of the monthly rental 
  • 100% of the VAT on any maintenance charges 
  • Lease hire vans which aren't used for private use offer even greater incentives 

This is a popular finance option for businesses as the vehicle does not appear on a company`s balance sheet and as such there are no risks with anticipating depreciation costs as, instead, they are calculated by the leasing company and factored into the monthly payments.

Personal contract car hire

Used by individuals and employers who want to substitute a cash allowance for a leased company car. It's also used as a personal finance option by individuals with no connection to business use. The contracts can include or exclude maintenance and usually include 12 months Vehicle Excise Duty (road tax).

Business car lease purchase 

Is designed for companies who wish to keep the vehicle as a business asset and discount the cost over a longer period of time. There are implications in terms of tax and VAT and, unlike contract hire, the vehicle will appear as an asset on the balance sheet of the company accounts, rather than in the profit and loss accounts.

Personal car lease purchase 

Designed for individuals who wish to own the vehicle after the monthly instalments have been made. Typically, the vehicle will be funded by an initial deposit followed by a schedule of monthly payments, usually over one to four years. Ownership passes to the individual when all the payments have been made.

Finance car lease 

Is an alternative to contract hire, both personal and business, giving the leaser the option to repay the capital cost of the vehicle over a longer time period. It`s a good option for those who may incur high mileage or where the vehicle may be subjected to more wear and tear than is acceptable under normal contract terms. The leaser will take the risk on the sale of the vehicle at the end of the contract, but never assumes ownership. A one-off larger balloon payment is usually made to reduce the monthly payments. 

Payments are determined by a number of factors. First there is the retail price of the car at the start of the contract; then a calculation is made about its value at the end of the contractual term, after depreciation, wear and tear etc - this is its residual value. Typically a vehicle will lose around 50 per cent of its value over a three year lease. The payments you make are based on the difference between the retail price and the residual value of the vehicle. 

The higher the residual value, the lower your payments will be. This means you can often afford to lease a better vehicle than you could buy because luxury vehicles tend to have a higher residual value with less depreciation. 

You pre-agree your mileage when you take out the contract. The mileage bands range from 10,000 to 40,000, and if you do exceed your pre-agreed limit then an excess mileage charge will apply. You are also expected to keep the car in a good state of repair. Many leasing providers now include maintenance packages, which typically include servicing, replacement tyres, brakes and pads etc. 

When your car is due to be returned, clean it and carry out an inspection to ascertain if it`s in suitable condition and meets the terms of the contract - or take it to a garage for an assessment. Get any damage or mechanical problems (in excess of fair wear and tear) fixed prior to returning the vehicle to the lease company. 

Can you buy the vehicle you are leasing?

Through personal and business lease purchase, you will own the vehicle at the end of the term. On some schemes, the lease company will offer you a guaranteed price to purchase the car at the end of the contract. 

What else do you need to know? 

If you set up a car leasing agreement you will need to ensure you have sufficient car insurance cover in place. Always shop around and compare quotes from multiple car insurance companies and take time to compare the policy features so you are sure you are getting the right cover before you buy.

Why take a vehicle on Short Term Lease?

In today's uncertain world we have experienced a massive growth in demand for short term car leasing. Companies are replacing Long Term Lease vehicles with our Short Term ones. They then have total flexibility over their fleet of cars and vans only paying for vehicles when they need them and returning them when they are no longer required. 

We have also started to see companies recruiting staff again and taking this product for their new staff. We specialise in providing short term contract hire solutions where car hire is required for 28 days or more. Long term car rental is available to both business and private users over 1 to 12+, 28 day periods. Cars currently available on long term rental are Manual, Automatic, People Carrier, Estate & Convertible Ford and Vauxhall vehicles. 

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