Contract hire is the most popular form of vehicle leasing here in the UK. It is both tax efficient, cost effective, easy and the costs are fixed. Due to the size of the contract hire market in the UK, there is a fair bit of competition and therefore you can negotiate some very good deals. This is especially true for larger fleets. You should always shop around when you are looking to lease vehicles, so that you can search out the best deals.
The selection of vehicles on offer via contract hire is vast and any of the mainstream car and van makes and models are available.
Benefits of Contract Hire Include
- VAT– Yes with contract hire you can claim back 100% of the VAT on your company vehicles if they are used purely for business purposes. If they are used for personal use as well, you can only claim back 50% of the VAT. This reduces the cost of your company vehicles considerably. If you need to prove a vehicle is only being used for business, you can install vehicle trackers. The reports from vehicle tracking systems are accepted as evidence by the HMRC. Also you can claim back all the VAT on the monthly maintenance fee regardless of whether it is being partly used for personal millage or not.
- Only a Small Initial Outlay– Contract hire usually requires a much smaller deposit be paid out. By putting down a larger deposit you are effectively loosing that money as the vehicle will depreciate in value. With contract hire the deposit is considerably smaller.
- Fixing Costs – You pay a fixed monthly cost per vehicle and when the contract term is up you simply return the vehicle. You can fix the monthly cost further by paying an extra monthly fee to have the leasing company look after maintenance, servicing and supply courtesy vehicles when necessary. This helps with budgeting your monthly and annual outgoings.
- Beat Depreciation – Cars and vans do depreciate, but by leasing your vehicles you take advantage of the huge discounts that the lease company can negotiate by buying the vehicles in bulk and disposing of the vehicles in a cost effective way when the lease is completed. With leasing these savings are passed onto you the customer.
- Off Balance Sheet Funding – Contract hire is considered an expense and goes on your profit and loss account. They are not considered as an asset to the business.
- Less Paperwork – Much of the paperwork associated with running a fleet of vehicles is taken care of by the lease company, freeing your staff up to do the more important profit making tasks.
With a large range of benefits you can see why contract hire is so popular with businesses throughout the UK.
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