What are the benefits of business contract hire?

What are the benefits of business contract hire?

  1. Free up cash flow – with contract hire there is no need to invest cash in a depreciating asset as the initial payment is relatively small - the equivalent of only 3 monthly payments.
  2. Lower payments - the business spends as much as 60% less each month than it would with a loan or hire purchase so it gets a ‘bigger bang for its buck’.
  3. Cheaper than buying – overall, contract hire is cheaper than ownership if the business is changing its vehicles at least every three to four years.
  4. No/low VAT – If the business is VAT registered and the car is used entirely for business, then all the VAT paid can be reclaimed.  If it is a company car used for work and leisure then 50% of the VAT paid can be reclaimed.  In any case, VAT is only paid on the portion of the car used during the lease period (e.g. 3 years rather than the 7 year life of the car) and is spread out and paid with your monthly lease payment instead of being paid all at once upfront.
  5. Off balance sheet – the business is not committed to the whole cost of the car so the financial risk is reduced and the car does not appear as an asset on the balance sheet.
  6. No hassle with replacement - there is no need to arrange or negotiate to sell the vehicle when a new one is required.
  7. No depreciation risk - there is no risk associated with the vehicle because the business will never need to sell it.
  8. Easy delivery – the vehicle will be delivered free of charge to the UK mainland address of your choice
  9. Lower maintenance costs - all maintenance and services can be included in the monthly price.
  10. No tax – the car tax disc will be included for the first year and often for the life of the duration of the contract.
  11. New vehicles – the business will always be running relatively new vehicles which gives it a positive, successful image.
  12. Tax efficient - leasing is a tax efficient product for acquiring new vehicles as it reduces your overall tax bill, as the cost is deductible as a business expense.

Related FAQs

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