With contract hire, instead of purchasing a new car, you effectively rent it from a finance company for an agreed period of time. Car leasing has become more popular over recent years, but not everyone is aware of it as an option. In this short guide, we explain exactly what it is and how it works.
If you’d like to know more about contract hire for you or your business, give our leasing team a call on 08000 180 730 or use this enquiry form to get in touch.
Business contract hire, also known as business leasing, allows a company to lease cars for a set period of time and pay by monthly instalments. The rental cost is reduced because the business lease provider reclaims the VAT on the car or fleet you choose and then passes the saving on to you.
The business doesn’t own the car, so it’s off the company’s balance sheet and is simply returned to the lease provider at the end of the contract term.
Business leasing is suitable for sole traders, partnerships and limited companies and it can be used to fund a single company car or a fleet of company vehicles. It’s a particularly popular option for VAT registered companies, as they can claim back 50% of the VAT on vehicle payments and 100% of the VAT on maintenance.
Personal contract hire is simply car leasing for individuals. Like business leasing, it is a form of finance. You pay an initial payment and then rent the car from the finance company for the duration of the lease.
How much you pay each month can be flexed around how long you want to lease the vehicle for, your estimated annual mileage and the size of the deposit you put down. Generally speaking, a longer rental period, low annual mileage and a bigger initial rental, can all help reduce the monthly cost.
Personal contract hire can be a good option if you take a company car allowance as it’s easy to find a car within your budget, costs and fixed and it could allow you to drive a vehicle that might be beyond your budget to buy.
Yes, as a sole trader you are eligible for business contract hire. You’re also eligible for personal contract hire. Our business team can help you decide which is right for your particular circumstances.
If your business is not VAT registered you’re still eligible for contract hire. You simply pay the VAT on the monthly rental cost.
You can choose to lease your car from 24 to 48 months. It’s up to you.
Yes, you can use your company car allowance to take out a personal contract hire agreement on a brand-new car of your choice. The monthly rental cost is fixed making it easy to budget for.
A broker is basically a middleman between you, a dealership and the lender. For providing their services you will be charged an admin fee and may be subject to extra fees too. By coming directly to a reputable dealer like Dick Lovett with a wide range of manufacturers and models on offer, you avoid the broker’s fees and benefit from discounts the broker can’t necessarily access.
What’s more, you can visit a Dick Lovett dealership and all you need to make an informed decision is there. You can look around the cars, take a test drive and have a member of our dedicated Business Team guide you through your finance options. Or if you prefer, we can take you through everything over the phone. It’s up to you.
Ultimately it’s your choice of course. But why pay fees if you don’t need to?