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.
- The interest costs relevant to the amount of money
borrowed (The cost of the vehicle)
- The depreciation the vehicle suffers during the
contract period. Clearly the more miles you travel
the more the vehicle depreciates
- Road Fund Licence
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,
- All scheduled servicing,
- All remedial repair work.
- All tyres, batteries and exhausts (including catalytic
converters)
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.
Breakdown Cover
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) |