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What is business contract hire?

Business contract hire is a popular long-term vehicle rental agreement suitable for sole traders, partnerships and limited companies.

It’s a particularly popular option for VAT registered companies, as they can claim back 50% of the VAT for the supply of the vehicle.

How could it work for your business?

If your company leases a vehicle on a contract hire basis, you will pay to rent the vehicle in monthly instalments for a contract of 24 or 48 months, for example. Once the contract is up, the vehicle is returned to the leasing provider, leaving them to worry about depreciation values and disposal of the car or van.

Contract hire means your company can concentrate on its core activities, while avoiding the financial risk and administrative burden of owning your vehicle or fleet.

Video: PCH and contract hire explained

Business contract hire has a counterpart that is available for private customers, known as personal contract hire (or PCH). To find out more about this, click here.

For a brief but clear overview of PCH and business contract hire, watch the video below.

Is my company eligible?

Business contract hire is available to financially eligible sole traders, partnerships and limited companies. To find out whether you’re likely to be eligible for finance, take our business finance eligibility questionnaire.

What type of company are you?

How many years have you been trading for?

How many years have you been trading for?

Nationwide Vehicle Contracts Limited specialise in helping new businesses obtain finance. If your company is under 12 months old, you may be required to submit 3 months business bank statements, management accounts (if available) and a director's guarantee (ltd companies only) to support your finance application. In some cases, a larger initial rental may also be required.

Would you consider a personal finance application?

Yes

Has your company ever been declined for finance?

Has your company ever been declined for finance?

Would you be willing to provide a Directors Guarantee?

Good News!

You are likely to be eligible for business finance based on the details you provided.

What would you like to do next?

We're sorry, but you are not currently eligible for business finance

Lenders may require more detail on some of the answers you provided before you will be eligible for finance.

Please call us on 0345 811 9595 to discuss your finance options

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The key features of business contract hire

  • Lending provider remains the owner of the vehicle, meaning the vehicle appears ‘off the balance sheet’ of your company
  • Fixed monthly rentals cover the rental of the vehicle, plus any maintenance options if chosen
  • The monthly rentals are calculated by taking the following into consideration:
    • The cost of the vehicle
    • The contract period
    • Anticipated residual value of the vehicle (how much the vehicle is likely to be worth at the end of the contract)
    • Mileage allowance (as chosen by you before the start of your contract)
    • Any additional options, such as a maintenance contract
  • Vehicle tax is provided for the full term of the contract

The key benefits of contract hire for business

  • Low initial rental
  • Fixed rentals for the whole package, making budget planning easier
  • Flexible terms to meet your company’s requirements, with variable contract duration and mileage terms
  • Contract hire removes depreciating assets from your company’s balance sheet, and the associated risks of owning vehicles, such as depreciation and disposing of the vehicle
  • Maintenance of vehicles can be included in the monthly fees, spreading the cost
  • Flexible invoice arrangements help to considerably reduce administration
  • If yours is a VAT registered company, you can claim back 50% of the VAT on the finance element

Considerations for contract hire for business

  • Early termination can be expensive
  • If you have exceeded your agreed mileage, an excess mileage charge will be payable, worked out on a 'pence per mile' basis as set at the start of your contract
  • You must return the vehicle in a well maintained condition. Any damage over and above that stated in the Fair Wear and Tear Guide will be subject to additional charges
  • Vehicle must be insured with full comprehensive cover
  • You will never own the vehicle as there is no option to buy it

What happens at the end of the contract?

At the end of the contract, the vehicle is returned to the leasing provider, meaning you are then free to hire another vehicle or vehicles, without any financial obligation.

If you have exceeded your agreed mileage, an excess mileage charge will be payable, worked out on a ‘pence per mile’ basis as set at the start of your contract.

When returning your vehicle, it will also be assessed according to the BVRLA Fair Wear and Tear guidelines. Any damage that falls outside of these guidelines may be subject to end-of-lease penalty charges. For more information on this, visit our Fair Wear and Tear guidelines page.

Business contract hire case studies

Case study 1:

Joe Bloggs owns his own Limited Company – a property management firm. He takes out a business contract hire agreement on a Mercedes M Class, as part of his fleet of three vehicles.

The contract:

  • Duration: 48 months
  • Annual mileage: 15,000
  • Initial rental: £2897.95 +VAT
  • Monthly rentals: £482.97 + VAT

As the property management firm is a VAT registered company, any VAT paid on the vehicle can be claimed back.

At the end of the contract, the Mercedes M Class is returned to the leasing company. Joe Bloggs decides to take out another business contract hire agreement on the latest Mercedes M Class for a further 48 months.

Case study 2:

John Smith is a sole trader, working as a painter and decorator. He needs only one van, so takes out a business contract hire agreement on a Ford Transit Custom.

The contract:

  • Duration: 24 months
  • Annual mileage: 20,000
  • Initial rental: £1473.00 + VAT
  • Monthly rentals: £245.50 + VAT

Ply lining is applied to the van before it reaches Mr Smith to protect the vehicle and help reduce the risk of de-hire damage charges. Mr Smith chooses to apply his own company decals on his van to help promote his business on the road.

At the end of the contract, Mr Smith cleanly removes these decals before returning the vehicle to the leasing company. He then decides to purchase a different van for future use.

Please note: case studies created for illustrative purposes only.

Business leasing deals

If your business is looking to lease a car or van on a contract hire basis, search our huge catalogue of brand new vehicles, or call our leasing specialists on 0345 811 9595 to discuss the options available to you.


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