Contract Hire, sometimes referred to as an Operating Lease, is a long term rental agreement. Contracts range from 12 to 60 months and are tailored to the business's requirements.
The Contract Hire Company reclaims the VAT on the original purchase, which reduces your monthly rentals (which are + VAT). Contract Hire is a very popular choice for VAT registered companies as they can claim back 50% of the VAT on the finance element for cars and generally 100% for commercials (subject to no private use, no exempt turnover and not being on the Flat Rate VAT Scheme).
On contracts with maintenance the VAT on the service element is 100% recoverable. One of the major benefits is that there are no disposal worries as the future value is underwritten by the leasing company. Another benefit of Contract Hire is that it is generally 'off balance sheet funding' (subject to legislation change) which means it can improve your gearing ratio (assets to borrowing ratio) and therefore possibly your borrowing ability in the future.
* If the vehicle exceeds the contract mileage an excess mileage charge will apply. These will be specified on your quotation. You should try and estimate the distance you will travel as accurately as possible to try and avoid excess mileage charges at the end of your contract.
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