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Business Contract Hire is a popular and hassle-free way for businesses to finance their vehicles. It allows you to lease brand-new cars for an agreed period, typically ranging from 24 to 60 months, without the burden of ownership.

With a fixed monthly rental fee, you can effectively manage your fleet and focus on your core business operations.

How does Business Contract Hire work?

In order to qualify for a business car lease, you need to be one of the following:

  • A limited company or private limited company
  • A sole trader
  • A VAT registered company
  • A limited liability partnership
  • A partnership

Similar to a personal lease, an initial down payment is required before the lease begins. This down payment is expressed as multiples of the monthly rental. For example, a 6+23 deal means you pay six months' lease costs upfront, followed by 23 monthly payments.

The annual mileage limit for a business lease is often higher than for a personal lease because company cars typically accumulate more motorway miles. The maximum is generally 40,000 miles per year, but this can vary depending on the specific deal. If you exceed the mileage limit, the company will incur an excess mileage charge, as well as any damage charges if repairs aren't made before returning the car. These charges are sometimes passed on to the employees who drive the business-leased cars.

Advantages of Business Contract Hire

  • Cost effective

    Instead of making a significant upfront investment to purchase vehicles outright, you can conserve your capital and allocate it towards expanding your business.

    With fixed monthly rentals, you have a predictable budget, allowing you to accurately forecast your expenses and manage cash flow effectively. This eliminates the uncertainty associated with depreciation, maintenance costs, and potential resale values, providing stability and peace of mind.

  • Tax advantages and VAT benefits

    Choosing Business Contract Hire brings several tax advantages for your business. As the monthly rental payments are considered an operating expense, they can be offset against taxable profits.

    This reduces your corporation tax liability, ultimately leading to greater savings.

    Additionally, if your business is VAT registered, you can usually claim back a portion of the VAT on the monthly rentals, further reducing your overall costs.

  • Minimal administrative burden

    When you opt for Business Contract Hire, the administrative burden associated with vehicle ownership is significantly reduced. The finance provider takes care of the vehicle's depreciation, road tax, and, in some cases, maintenance and servicing.

    This allows you to focus on your core business activities, saving you time, resources, and potential headaches. At the end of the contract, you can simply return the vehicles, eliminating the hassle of selling or disposing of outdated vehicles.

  • Access to the latest models and improved image

    Business Contract Hire enables you to showcase your business with the latest and most technologically advanced vehicles. By regularly upgrading your fleet, you can project a professional and modern image, demonstrating your commitment to quality and reliability.

    Access to new models also means benefiting from improved fuel efficiency, reduced emissions, and enhanced safety features. This can contribute to cost savings in terms of fuel consumption and potentially lower insurance premiums.

Disadvantages of Business Contract Hire

  • No modifications

    The vehicle will need to be returned in the same condition as it was when you received it. So you may not be able to plaster your business advertising around the car or make any kind of modification.

  • Charges for damage

    If there is any damage, aside from normal wear and tear, you may face large charges to rectify this at the end of your agreement.
  • No personal use

    You can only reclaim 100% of the VAT on a business lease if there is no personal use at all.
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Chippenham Motor Company Ltd is an Appointed Representative of Automotive Compliance Ltd, who is authorised and regulated by the Financial Conduct Authority (FCA No 497010). Automotive Compliance Ltd's permissions as a Principal Firm allows Chippenham Motor Company Ltd and MRG to act as a credit broker, not as a lender, for the introduction to a limited number of lenders and to act as an agent on behalf of the insurer for insurance distribution activities only.

We are a credit broker and not a lender. We can introduce you to a carefully selected panel of lenders, which includes manufacturer lenders linked directly to the franchises that we represent. We act on behalf of the lender for this introduction and not as your agent. We are not impartial, and we are not an independent financial advisor.

Our approach is to introduce you first to the manufacturer lender linked directly to the particular franchise you are purchasing your vehicle from, who are usually able to offer the best available package for you, taking into account both interest rates and other contributions. If they are unable to make you an offer of finance, we then seek to introduce you to whichever of the other lenders on our panel is able to make the next most suitable offer of finance for you. Our aim is to secure a suitable finance agreement for you that enables you to achieve your financial objectives. If you purchase a vehicle, in the majority of cases, we will receive a commission from your lender for introducing you to them which is either a fixed fee, or a fixed percentage of the amount that you borrow. This may be linked to the vehicle model you purchase.

Different lenders pay different commissions for such introductions, and manufacturer lenders linked directly to the franchises that we represent may also provide preferential rates to us for the funding of our vehicle stock and also provide financial support for our training and marketing. But any such amounts they and other lenders pay us will not affect the amounts you pay under your finance agreement; however, you will be contributing towards the commission paid to us with the interest collected on your repayments. Before we propose you to a potential lender, we will inform you of the likely amount of commission we will receive and seek your consent to receive this commission. The exact amount of commission that we will receive will be confirmed prior to you signing your finance agreement.

All finance applications are subject to status, terms and conditions apply, UK residents only, 18s or over. Guarantees may be required.

Chippenham Motor Company Ltd is an Appointed Representative of Automotive Compliance Ltd, who is authorised and regulated by the Financial Conduct Authority (FCA No 497010). Automotive Compliance Ltd's permissions as a Principal Firm allows Chippenham Motor Company Ltd and MRG to act as a credit broker, not as a lender, for the introduction to a limited number of lenders and to act as an agent on behalf of the insurer for insurance distribution activities only.

We are a credit broker and not a lender. We can introduce you to a carefully selected panel of lenders, which includes manufacturer lenders linked directly to the franchises that we represent. We act on behalf of the lender for this introduction and not as your agent. We are not impartial, and we are not an independent financial advisor.

Our approach is to introduce you first to the manufacturer lender linked directly to the particular franchise you are purchasing your vehicle from, who are usually able to offer the best available package for you, taking into account both interest rates and other contributions. If they are unable to make you an offer of finance, we then seek to introduce you to whichever of the other lenders on our panel is able to make the next most suitable offer of finance for you. Our aim is to secure a suitable finance agreement for you that enables you to achieve your financial objectives. If you purchase a vehicle, in the majority of cases, we will receive a commission from your lender for introducing you to them which is either a fixed fee, or a fixed percentage of the amount that you borrow. This may be linked to the vehicle model you purchase.

Different lenders pay different commissions for such introductions, and manufacturer lenders linked directly to the franchises that we represent may also provide preferential rates to us for the funding of our vehicle stock and also provide financial support for our training and marketing. But any such amounts they and other lenders pay us will not affect the amounts you pay under your finance agreement; however, you will be contributing towards the commission paid to us with the interest collected on your repayments. Before we propose you to a potential lender, we will inform you of the likely amount of commission we will receive and seek your consent to receive this commission. The exact amount of commission that we will receive will be confirmed prior to you signing your finance agreement.

All finance applications are subject to status, terms and conditions apply, UK residents only, 18s or over. Guarantees may be required.
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