Business Contract Hire

From Wikipedia, the free encyclopedia

Contract Hire is a term used in the UK to describe a longer term (usually 3 year) RENTAL of a vehicle. There is a considerable industry - the Contract Hire and Leasing sector - in the UK, with the largest current player being LEX - a wholly owned subsidiary of the Halifax Bank of Scotland, that runs in excess of 250,000 vehicles. The UK industry is arguably the most successful and best managed (and served) of all, worldwide, largely driven by the UK's undying passion for company funded vehicles for business - or perks. The industry has a representative body - the 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 - [1]. The BVRLA's membership has close to 2 million vehicles under management in the UK, and their activities also include lobbying MP's 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 & published annually by Fleet News - an industry weekly publication from publishers EMAP. One other player in the UK is Motability Finance, the commercial arm of the governmental charity Mobility with a fleet over 450,000 vehicles funded via the allowance payments for registered disabled people. Motability Finance is owned by the major UK clearing banks, and rentals payable use the diabled persons monthly allowance to pay for the vehicles supplied, mainly without any further cost. Motability does not supply business use vehicles, and therefore cannot truly be counted within the Leasing sector as a "normal" commercial operation, although it is operated professionally in exactly this fashion.

These companies rent vehicles to business users, normally including a maintenance and repair plan for the period of the user's choice. The vehicle remains the property of the Lessor (Contract Hire company) and never becomes the property of the lessee (the company renting and using the vehicle). Contract Hire is a very popular choice for V.A.T Registered companies with more than 40% choosing this Funding method (Fleet Week). Tax advantages and reduced administration assists business to budget more accurately for their vehicle requirements. Contract Hire is available to Sole Traders, Partnerships and Ltd Companies.

The details below typify the way Contract Hire is portrayed and sold to businesses.

[edit] Finance / Taxation Benefits

• Accurate Monthly Budgeting
• Off Balance Sheet
• Improved Cash Flow
• Minimum Capital Expenditure
• Fixed Interest Rates
• Rentals Allowable against Taxable Income, subject to the 'half the excess rule' partial disallowance
• V.A.T Recoverable on Monthly Rentals*
• No Depreciation Risks

The tax rules surrounding vehicle leasing are currently the subject of a UK government review, and may change soon.

* Only 50% of the V.A.T relating to the Finance element is recoverable if car has private usage. 100% if Business only. On Contracts with Maintenance the Service element V.A.T is Recoverable.

[edit] Vehicle Running Benefits

• No Vehicle Disposal Problems
• Reduced Administration
• On-going Advice and Support
• Road Fund Licence Provided for Duration of Contract
• Optional Maintenance Package
• Optional Breakdown Rescue Cover
• Optional Replacement Vehicle Cover in Event of Breakdown
• Optional GAP Insurance*

*GAP Insurance provides cover for the shortfall between the outstanding Finance and the Insurance Value if vehicle is declared a Write-off by your Insurance Company.

[edit] External links

• BusinessCar magazine has news about the contract hire industry
• Original content acquired from here