Often referred to as Contract Hire it is a method of acquiring the use of a vehicle for business purposes without having to pay for all of it.
It is called a lease because you never actually own the vehicle, you rent it for a given period, normally 2, 3 or 4 years.
At the end of this period you give the vehicle back.
The money you pay to the Finance / Contract Hire Company is referred to as the “rental” and is normally charged monthly.
The “Rental” is calculated on the following basis.
Maintenance packages can be added to a company car lease, again these are calculated on the anticipated mileage the vehicle will travel.
A maintenance package should allow for,
Relief vehicle facility
This is another package that can be added to a company car lease and will provide for a temporary replacement vehicle due to various circumstances, eg breakdown accidents etc. again cost is dependent on the level of cover chosen.
Normally standard for the first 12 months of a vehicles life, it can be extended to cover the remaining period of a business lease / contract hire
The benefits of a Business Lease (Contract Hire)
With a lease you only pay for the asset while you are using it. So with a business Lease (Contract Hire) you are only paying for the value the vehicle loses (its depreciation) whilst you are renting it.
This is cheaper that buying it all at once.
Because the finance / contract hire companies buy many thousands of vehicles, they buy better than you or I can, these savings are passed on to you.
If you are a VAT registered business you are able to reclaim 50% of the VAT payable on the rental (subject to business use of the vehicle). Please note commercial vehicles are 100% allowable
You do not have the risk of the vehicle disposal at the end of its useful life.
Business Lease (Contract Hire) account for nearly 65% of all new vehicle acquisitions)