What is Personal Contract Hire?

Personal Contract Hire is car leasing for an individual rather than a business. It’s a form of finance but instead of buying a car you rent it from a finance company for an agreed period of time. You can choose how long you want to lease the car for within the terms offered, but it’s usually either 24, 36 or 48 months. You make an initial payment, decide how much mileage you expect to do and whether you want to include servicing and maintenance in your monthly cost. The amount you pay each month will depend on the size of your deposit, which is usually the equivalent of three monthly payments, how much mileage you expect to do and how long you want to lease it for. Because you’re leasing, the car, you don’t own it and you’ll also have to fulfil obligations during the rental period, such as maintenance and damage repairs should they be needed. At Dick Lovett we have a team of Personal Contract Hire specialists on hand to help guide you through the process.

Who is eligible for business car leasing?

If you’re in business or self-employed, your business is trading and is in profit, the chances are you will qualify for a car lease deal. Contract hire is open to: Sole traders VAT registered businesses Partnerships Limited companies PLCs You will need to provide proof of your identity and your address, bank statements and/or audited accounts and have a good credit rating.

What are the pros and cons of Business Car Leasing and Personal Contract Hire?

There are lots of reasons why leasing or hiring a car through Dick Lovett is a great idea but, of course, you still have responsibilities and you won’t own the vehicle at the end of the contract hire period. Here we’ve set out the key points of the leasing deals: Pros Drive a brand new car every few years Low initial outlay - typically equivalent to 3 months rental payment Fixed, manageable monthly payments – helps with manage cash flow and enables you to drive a better car for your budget Choice of contract term - from 24 to 48 months Option to include servicing and maintenance If you run a business, there are tax benefits – car lease costs can be up to 100% allowable against corporation tax depending on its Co2 emissions, and you can reclaim 50% of the VAT on the monthly rental cost No depreciation to worry about - at the end of the contract, the vehicle is simply handed back so no worries about resale value or having to dispose of it Hassle free – everything is taken care of by the dealer and finance company Road tax, manufacturer’s warranty and breakdown cover is included Only have to pay for fuel and insurance Cons You don’t own the car and there is no option to buy it at the end of the contract You will need the amount of mileage you need and if you go over this, you will have to pay an excess mileage charge If you decide to end the contract early, you may incur charges You must return in a well-maintained condition. If not, there will be extra charges to pay You must pay for fully comprehensive insurance cover

Can I use my company car allowance to lease a car?

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.

What is Business Contract Hire and is it different to Business Car Leasing?

Both Business Contract Hire and Business Car Leasing are the same thing and instead of buying a car you simply rent it from a finance company for an agreed period of time. At Dick Lovett we have a team of business leasing and contract hire specialists who can help you choose how long you want the contract for and decide your annual mileage allowance. These criteria then help to determine the amount you will pay each month. The most obvious difference between buying and leasing is that when you buy a car you own it and when you lease a car, you don’t. You are renting the car from the finance company, so at the end of the contract all you have to do is hand the car back in good condition – just like you would a hire car. As with any contractual arrangement, you must fulfil your obligations under the lease agreement. If you don’t there’s likely to be more to pay so you should be mindful of what you have committed to and how the car is used. Exceeding the agreed mileage, returning the car early or in poor condition could incur extra charges.

Is my mileage limited under a Personal Contract Hire or Business Car Leasing deal and, if it is, what happens if I exceed it?

Yes, both Personal Contract Hire and Business Car Leasing deals include restrictions on the amount of mileage you can do each year as this also affects the rate of your monthly car leasing payments. If you exceed your expected mileage you will incur additional charges as set out in your contract hire agreement.

What are the tax benefits of business contract hire?

There are a few tax and VAT advantages when leasing a car through your business: The monthly payment can be offset against taxable profits. How much depends on the CO2 emissions of your chosen car - if your car emits CO2 emissions of 110g/km or less, the full net monthly lease cost can be offset; if your car’s CO2 emissions exceed 110g/km 85% of the net monthly lease cost can be offset. A car on contract hire is classed as "off balance sheet", which means it isn’t sitting on the books as a depreciating asset. If your business is VAT registered you can reclaim 100% of the VAT on the monthly rental cost if the car is used exclusively for business. You can also reclaim 50% of the VAT if the car is also used personally and 100% of the VAT on a maintenance package, if you have added one to your contract hire agreement. If you are self-employed as a sole trader, partner or an LLP member you won’t have to pay company car tax. If your business is not VAT registered you’re still eligible for contract hire. You simply pay the VAT on the monthly rental cost.

Surely, I’ll get a better personal or business car leasing finance deal if I go through a broker?

Dealerships like Dick Lovett can often offer leasing and car hire deals that brokers can’t access, such as retail discounts, and sometimes reduce prices on older stock when newer models launch. With Dick Lovett you also have the option of part-exchanging your old car to cover some of the initial cost of a contract hire agreement. Most brokers don't offer part exchange, so you'll need to find the money from elsewhere – and arrange to sell or dispose of your old car. Going direct to a dealer cuts out any extra and potentially unnecessary expense. The broker is simply a middleman between you or or business, a dealership and a lender. By going directly to Dick Lovett you only deal with us and a finance company. This means you won’t have to pay admin fees and other charges for the broker’s services, which can be upwards of £300. Plus at Dick Lovett you know you’re dealing with a long-standing family business which is trusted by other local businesses and the community. You can be assured our team will always go the extra mile if you choose a Personal Contract Hire or Business Car Leasing deal with us.

I’m a small business owner - can I lease a vehicle personally or do I have to go through my company?

If you choose Business Car Leasing or Business Contract Hire the car is tied to your business so the rental cost can be offset against tax. If the car is also for personal use, it will be considered a benefit in kind by HMRC and you will pay company car tax, however, the other tax benefits may outweigh this. You can also choose Personal Contract Hire which means the car is not tied to your business. You use the car as you please, so it can work well for business owners who only use their car for business occasionally. The car is not seen as a benefit-in-kind by HMRC, so you don’t have to pay company car tax, although the cost of contract hire cannot be offset against corporation tax. You can claim mileage back from your business - 45p per mile for the first 10,000 miles and 25p per mile thereafter.

Do I need to complete an MOT for my lease car?

New cars do not require an MOT certificate until the third anniversary of first registration. So providing your lease agreement is not for any longer than three years then the MOT is unlikely ever to be an issue. If you have a lease agreement for longer than three years, then you would need to put the car through an MOT test in the normal way.

Is car insurance included in the leasing price?

No. Unlike a rental agreement although you are not the car’s owner you do need to arrange your own insurance and ensure that you are covered for the appropriate type of use.

Who owns the car on a business lease?

The car remains the property of the leasing company for the duration of the contract. At the end of the contract, you just hand the car back and, if desired take out a new lease with a new car.