What is Business Contract Hire

Business Contract Hire is available on Cars and Light Commercial Vehicles.

It is an agreement between your business and the Finance Provider for a set period of time (Typically 24 – 48 months) and mileage between 5,000 and a maximum of 50,000 miles per year, where you have the use of a new vehicle. The cost of the Contract Hire is determined by the total contract mileage and term required.

Contract Hire is the most popular choice for businesses who are VAT registered.

Key Features of Contract Hire

Some of the features of Business Contract hire are;

• Fixed monthly payments for the length of the contract
• The finance Company remains the owner of the vehicle, which removes the worry of depreciation and the issues of disposing of the car at the end of the contract.
• There are benefits of claiming elements of the VAT back for VAT registered Companies
• Road Fund Licence (tax) provided for the entire term of the Contract at the prevailing rate
• Gives you the option to change your car easily at the end of the contract
• The vehicle appears as “Off the balance sheet” for the business which could improve Key accounting ratios which may allow other avenues of funding for the business

Personal Contract Hire - Customer Maintained

Personal Contract Hire (PCH) is a cost-effective method of funding the use of your chosen car, for your chosen contract duration. Payments are fixed over the agreed term and can include a full Maintenance Package,if required for your convenience.

The contract is tailored specifically to your requirements, with agreed mileage terms suited to your individual circumstance.

At the End of the Contract you hand the car back. The vehicle is subject to a BVRLA assessment for Fair wear and Tear, and the contract Mileage, which if exceeded will incur an excess mileage charge.

What's included in the Price

For your monthly payment you get:

1. The Car
2. 24-hour Breakdown Assistance (Roadside and Home) for the first 12 months
3. Road Fund Licence for the duration of the Contract, based on the prevailing cost at time of delivery

Vehicle Maintenance and Servicing

The Customer is responsible for all Routine Servicing and Maintenance, Replacement Tyres and MOT's - all in line with the Manufacturer Guidelines and the Funders Terms and Conditions. and any top up oils or fluids (Including ADBlue where appropriate) during the contract term. A maintenance package can be added if required.

Benefits

• One single point of contact
• Dedicated team of specialist staff
• Assistance and guidance on servicing or technical issues
• Access to a national network of franchised and independent suppliers
• We continually enhance the service that we offer through online customer satisfaction surveys

Fair wear and tear

At the end of the contract, our Fair Wear and Tear policy is in line with the BVRLA Fair Wear and Tear Guide.

What is Finance Lease

Finance Lease is a product that is only available to businesses, for cars and Light commercial Vehicles. (LCV).

A finance lease is an On Balance Sheet method of funding your vehicle.

The vehicle is purchased by the leasing provider, who then estimates the re-sale value of the vehicle at the end of the contract based on the total contracted mileage and the term of the contract. The difference between the purchase price and the re-sale price is then charged to the customer along with interest in the way of monthly payments and is referred to as the “Balloon Payment”.

The resale price is often either sold by the funder or the business and the Balloon payment is settled from the proceeds of the sale. The final mileage could have an impact on the balloon value based on the accuracy of the original prediction. If there is a surplus from the sale, this is returned as a refund of renewals, however, if there was a negative impact you would be expected to pay the shortfall.

Benefits of Finance Lease

• This method of funding offers you the security of fixed monthly payments coupled with lower rentals that are not based on the full depreciation cost of the vehicle
• You have the option to reclaim 50% of the VAT back on the rentals (if the vehicle is used for business and personal use) or 100% of VAT on the rentals where the vehicle is used solely for business use only.
• Fixed monthly payments which help with an even cash flow.
• Flexible terms and mileage based on a minimum 24 months up to a maximum of 60 months.
• Lower monthly payments due to VAT implications and the “Balloon” payment at the end of the contract.
• No excess mileage charges because you retain the risk and reward on the residual value of the vehicle.
• Finance lease – the resale value is calculated by the finance company based on the cost of the vehicle, mileage and term of the contract. All sales proceeds less any fees are used to settle the outstanding balance. If there is a shortfall, the business will pay the difference and if there is a surplus, it is refunded to the business.

Flexible Lease

With a flexible lease the full value of the vehicle is funded including interest and costs and based on its depreciation over the contract period. Again, the vehicle appears on the company’s balance sheet.

At the end of the contract the vehicle has to be sold to a 3rd party not related in any way to the business. The sale can be carried out by the business or the funder. When sold, the full sales value is returned to the business except for a percentage administration fee which is payable to the finance company.

The business also has the option to keep the vehicle at the end of the Primary contract and an annual figure is calculated by the funder and is payable after completion of the primary period. The amount payable can vary depending on the value and term of the agreement and is known as a Peppercorn or secondary rental.

As the cost of the vehicle is fully repaid over the contract period, the payments on a Flexible Lease are generally higher than Finance Lease.

Useful Information

• Contracted terms from a minimum of 24 months to a maximum of 60 months
• Monthly payments are fixed
• You can reclaim 50% VAT when used for business and private use
• You can claim 100% VAT if used only for business
• Flexible Lease – The vehicle is funded on its total cost over the contract period and is also known as a Fully Amortised finance. There is no final balloon payment and no risk from residual value
• You also have the option to extend the lease at the end of the contract for a small charge, otherwise known as a peppercorn rental.

What is Sale & Leaseback?

Sale & Leaseback is a way for a business to release equity into the business by selling their own vehicles to a third party.

The monthly payments will be determined by the length of the agreement, an average annual mileage and the future value of the vehicles. All of the time the vehicles can be used in the normal manner with no disruption to the seller.

Cash Injection - Aids Cash Flow

By selling a company’s fleet of vehicles it would release any equity tied up in those vehicles and reduce the need to look at taking out loans and it can all be done whilst not interrupting the day-to-day business because it is merely a paperwork transaction.

Fixed Costs

BBy taking advantage of a Sale & Leaseback a Company can budget more effectively. The variable costs of running the vehicles can be incorporated into the lease and give more stable monthly outgoings moving forward.

Reduction in Risk

There is a reduction of risk because all vehicles depreciate in value over time. By selling the vehicles and leasing them back, you pass on the responsibility to the contract hire company to dispose of them at the end of the contract and they have the fluctuation in depreciation to worry about.

Improving The Balance Sheet

An important benefit is that it allows fixed assets that are depreciating to be removed from the Balance sheet which could improve key accounting ratios and have the possibility of making it easier to open other lines of credit to be used elsewhere in the business.

Vehicle Maintenance

By leasing your vehicles, you can opt for a maintenance package which will take care of future maintenance bills and reduce the increased risk of unforeseen costs. The new lease can also provide you with options like breakdown cover and tyre replacement to further reduce future outlay.

What is a Maintenance Contract?

A maintenance agreement is an additional charge that is added to your finance contract that will cover the servicing costs as they become due under the manufacturer’s guidelines. This continues for the entire length of the contract.

To add a maintenance contract onto your lease agreement is ideal if you want to know exactly what your vehicle is costing you. There are no hidden surprises when it comes to having the vehicle serviced.

What is Covered in a Maintenance Contract?

• All routine servicing in accordance with the manufacturers service recommendations
• The cost of mechanical and electrical repairs, oil, filters and labour are covered
• MOT’s where applicable
• Breakdown cover in the UK and Europe
• Worn Tyres replaced including valves and balancing
• Puncture repairs, unless due to malicious damage
• Repairs guaranteed by manufacturer trained and qualified technicians

Not Included in the Maintenance Contract

• Repairs due to accident damage. Including damaged body work, dents, missing or broken items. An example of this would include – Damaged windscreen or door windows, damaged alloy wheels, missing hub caps, cracked or broken lights and any type of vandalism.
• The use of incorrect fuel in the car
• Any repairs or replacement parts caused by driver error or misuse. Example, worn out clutch caused by riding the clutch or faulty/damaged engine parts caused by low oil or misuse.
• Burst or damaged tyres caused by driver misuse or mounting kerb or potholes.
• Ad-Blu is a consumable and falls outside of the maintenance contract