What is contract hire?
- This product is a method of hiring vehicles from a finance or leasing company and can be for both private or business customers.
- This is often referred to as personal contract hire (PCH) and business contract hire (BCH).
- With contract hire there is a fixed monthly rental. This can include all the maintenance costs, such as servicing, tyres and road fund licence.
- The mileage allowance is set at the beginning of the agreement.
What are the benefits of using contract hire?
- The deposit is usually low, sometimes as little as only 3 rental payments.
- Great for cash flow and budgeting as it enables businesses to finely tune budgets with no unexpected motoring costs. Especially when the payment includes full maintenance.
- The leasing companies pass on their huge manufacturer discounts to the customer in the form of lower rentals.
- Clients do not have to worry about depreciation and residual values as they just hand the vehicle back to the finance company at the end of the rental period.
- Very often this is the preferred option for businesses with a large fleet as they don’t see the benefit of owning a depreciating asset.
- Also with contract hire businesses would claim back the full VAT, for example, on a commercial vehicle or pool car, or 50% of the VAT where there is an element of private use.