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- Car Finance Glossary
- Contract Hire
Contract Hire is the most popular way for businesses to finance their vehicles. This type of car finance is also available to individuals. Contract Hire involves leasing of a vehicle for a fixed period of time at a fixed monthly rental. It is a business solution offering flexible deposit, flexible repayment periods, and also an optional maintenance package. This monthly rental is determined by the vehicle depreciation, length of contract, mileage covered and any additional services which may be required such as a maintenance contract.
Contract Hire requires an initial deposit for the car. The finance agreement is arranged with monthly payments over any period from one to three years. At the end of the finance/hire period, the car is simply handed back. You can then arrange contract hire on a new car.
There are a number of benefits to the business:
- Low initial outlay - Only the deposit needs to be paid, so cash is not tied up in the car.
- Off Balance Sheet Funding
- Easy budgeting as payments are fixed
- A good choice of cars and models usually available
- No need to worry about depreciation of cars or disposal at the end of the contract
- Package can include maintenance and service charges, making budgeting even easier
- Up to 100% rental can be offset against business use for tax purposes(dependant on cash price)
- Up to 100% VAT content is reclaimable if used solely for business purposes or the vehicle is a commercial vehicle (50% if vehicle is also used for private mileage).