Business Contract Hire
Encyclopedia
Business Contract hire is a term used in the UK to describe a vehicle operating lease used by a business. Contracts range from 12–60 months and are tailored to the businesses requirements.
There is a considerable industry - the contract hire and leasing sector - in the UK, with the largest current player being LEXAutolease - who manage a fleet of over 360,000 vehicles. The UK contract hire & leasing industry is largely driven by the UK's tendency for company funded vehicles for business - or perks.
The industry has a representative body - the British Vehicle Rental and Leasing Association (BVRLA) - which seeks to look after the interests of, and sets standards for operational quality for, both the contract hire and leasing sectors and the daily hire (car rental) sectors. BVRLA's membership has close to 2 million vehicles under management in the UK, and their activities also include lobbying MPs in respect of any fiscal matter which may affect the industry. There are 50 significant companies operating this type of supply, with possibly another hundred with fleets under 1,000 vehicles. The fleet statistics for these companies are researched and published annually by Fleet News - an industry weekly publication from publishers EMAP
.
Apart from the major players who concentrate mainly on corporate fleets and affinity car schemes, a significant independent broker channel has emerged estimated at 3,500 companies, supplying in excess of 300,000 vehicles per annum, mainly to small and medium enterprises (SMEs). Brokers help small companies find cost effective leasing options by comparing prices from a number of funders. Their commission fee is usually added to the capital cost of the vehicle, spread over the life of the contract and added to the contract hire rental you pay (usually circa £500-£750 commission or £13-20 a month added onto the rental).
Companies can lease vehicles with or without a maintenance agreement (if they wish) and contracts can also include tyre cover and a relief vehicle in the even of a breakdown. The vehicle remains the property of the lessor (contract hire / leasing company) and never becomes the property of the lessee (the company renting and using the vehicle).
Contract hire is a very popular choice for VAT registered companies as they can claim back 50% of the VAT on the finance element.
Tax advantages and reduced administration help businesses to budget more accurately for their vehicle requirements. Contract hire is available to sole traders, partnerships and limited companies.
Personal contract hire is available for private individuals, although in 2009 many of the big leasing names pulled out of this market to focus on business contracts.
The Main Advantages of Contract Hire are as follows:
There is a considerable industry - the contract hire and leasing sector - in the UK, with the largest current player being LEXAutolease - who manage a fleet of over 360,000 vehicles. The UK contract hire & leasing industry is largely driven by the UK's tendency for company funded vehicles for business - or perks.
The industry has a representative body - the British Vehicle Rental and Leasing Association (BVRLA) - which seeks to look after the interests of, and sets standards for operational quality for, both the contract hire and leasing sectors and the daily hire (car rental) sectors. BVRLA's membership has close to 2 million vehicles under management in the UK, and their activities also include lobbying MPs in respect of any fiscal matter which may affect the industry. There are 50 significant companies operating this type of supply, with possibly another hundred with fleets under 1,000 vehicles. The fleet statistics for these companies are researched and published annually by Fleet News - an industry weekly publication from publishers EMAP
EMAP
Emap Limited is a British media company, specialising in the production of business-to-business magazines, and the organisation of business events and conferences...
.
Apart from the major players who concentrate mainly on corporate fleets and affinity car schemes, a significant independent broker channel has emerged estimated at 3,500 companies, supplying in excess of 300,000 vehicles per annum, mainly to small and medium enterprises (SMEs). Brokers help small companies find cost effective leasing options by comparing prices from a number of funders. Their commission fee is usually added to the capital cost of the vehicle, spread over the life of the contract and added to the contract hire rental you pay (usually circa £500-£750 commission or £13-20 a month added onto the rental).
Companies can lease vehicles with or without a maintenance agreement (if they wish) and contracts can also include tyre cover and a relief vehicle in the even of a breakdown. The vehicle remains the property of the lessor (contract hire / leasing company) and never becomes the property of the lessee (the company renting and using the vehicle).
Contract hire is a very popular choice for VAT registered companies as they can claim back 50% of the VAT on the finance element.
Tax advantages and reduced administration help businesses to budget more accurately for their vehicle requirements. Contract hire is available to sole traders, partnerships and limited companies.
Personal contract hire is available for private individuals, although in 2009 many of the big leasing names pulled out of this market to focus on business contracts.
The Main Advantages of Contract Hire are as follows:
Finance / Taxation Benefits
- Accurate monthly budgeting
- Off balance sheet
- Improved cash flow
- Minimum capital expenditure
- Protect your capital budgets
- Fixed interest rates
- Rentals allowable against taxable income, subject to the 'half the excess rule' partial disallowance
- VAT recoverable on monthly rentals*
- No depreciation risks as the responsibility for disposal of the vehicle rests with the leasing company.
- 50% of the VAT relating to the finance element is recoverable if car has private usage. 100% if business only. On contracts with maintenance the service element VAT is recoverable.
- From April 2009, carbon emissions of company cars will impact the tax relief available for businesses.
- This will replace the current expensive car rule term and will move to a new 15% disallowance for contract-hired cars with 's 161 or above, whilst cars with 's 160 or below will enjoy no disallowance.
Vehicle Running Benefits
- No vehicle disposal problems
- Reduced administration
- On-going advice and support
- Road Fund Licence provided (vehicle excise duty paid) for duration of contract
- Optional maintenance package
- Optional breakdown rescue cover
- Optional replacement vehicle cover in event of breakdown
- Optional GAP insurance*
- GAP insurance (loan/lease payoff coverage) provides cover for the shortfall between the outstanding finance and the insurance value if the vehicle is declared a write-off by your insurance company.