Contract Hire

Contract Hire – Rent Vehicles at Your Convenience

Vehicles are among the most commonly bought, sold and rented assets in the UK business world. Most businesses feel the need to have at their disposal vehicles that can help their operations. These vehicles can range from regular cars for miscellaneous purposes to fleets of specialist vehicles to perform certain tasks.

For a business, the need for a vehicle is indeed indispensable. However, we must also consider that vehicles depreciate much faster than other assets. Therefore, it’s a common practice – especially among small and medium sized businesses – to rent the vehicles as per requirement. Although this is certainly a great boost to the cashflow, the rentals aren’t always cheap – especially in case of industrial, heavy-duty vehicles. Contract Hire comes as a convenient way of overcoming this problem.

Please visit this page to compare various types of Asset Finance.

What is Contract Hire?

Contract Hire is the most flexible form of Asset Finance. For most parts, it is aimed specifically at facilitating the vehicle rental process between the lessor and the lessee.

Many features of Contract Hire Asset Finance resemble those of Operating Lease. Hence, it’s not uncommon to find many people using these two terms interchangeably. Be that as it may, it’s important to note here that there exist some important differences between Contract Hire and Operating Lease. The most prominent among these is the responsibility of the asset. An Operating Lease often allows both the parties to split the costs of asset maintenance, insurance and security. On the other hand, this responsibility is usually shifted to the lessee in a Contract Hire agreement.

Contract Hire – Who is it for?

Contract Hire is a micro-niche of Asset Finance. Therefore, the utility of this service is often limited in scope.

Contract Hire may be the best option going forward for your business if your business:

• Requires one or more vehicles for a short length of time and this requirement is intermittent.
• Aims to upgrade the vehicles in use (typically, every 3 years).
• Prefers to preserve the cashflow and spread the costs of rentals in affordable instalments.
• Is not in a position to Hire Purchase these vehicles.

Benefits of Contract Hire

Contract Hire carries all the advantages of Asset Finance, along with some specific positives of its own. We have summarised these advantages below:

Cost Effective Financing

Purchasing vehicles can severely dent the cashflow of any business. Contract Hire offers a solution to this by making the required number of vehicles available without the need of sizeable deposits. Renting a vehicle over a period of time is almost always more profitable than outright owning it.

Easy Budgeting

While drawing up a Contract Hire agreement, we usually make sure that all the costs are rolled in. These costs usually involve the mileage projection, insurance, maintenance, processing fees, base rental and any interest, if applicable. This allows you to spread these costs in more manageable, monthly repayments. Many lenders also allow for the premature termination of the contract at no significant fees.

An End-to-End Solution

Contract Hire provides a thorough solution to acquiring vehicles. Right from sourcing the vehicles to reselling or disposing of them, all the factors can be rolled into the contract. This saves the borrowing business from having to deal with multiple agencies and pay processing fees many times over.

No Risk of Ownership

We have already seen that Hire Purchase is the best way to outright buy assets that your business is in dire need of. Contract Hire sits at the other end of this spectrum. Since it is essentially a rental agreement, you, as the lessee, will never own the asset in question. This saves you from the asset depreciation costs.

Off-balance Assets

In compliance with the standard accounting practices prevalent in the UK, rented assets need not enter the lessee’s books. This helps you avoid the relevant tax implications. Most lessors also agree to passing the writing-down allowances to you, thereby reducing the effective rental amount.

Contract Hire Add-on Services

Having access to the whole of market lessors across the UK, we can offer a number of add-on services for Contract Hire packages brokered through Commercial Finance Network. Just some of these are:

• Accident Management
• Security screening of drivers
• Flexi-hire packages
• Daily rental packages
• Comprehensive fleet management
• Fuel deduction and environmental incentives
• Advanced vehicle tracking
• Detailed performance reports
• Discounted revenue sharing

Please note that these add-ons are available at the lessor’s discretion.

Contract Hire Services Tailored to Your Requirements

Asset Finance can be quite tricky to tackle if you aren’t familiar with the intricacies of the agreement. Contract Hire is no exception to this. Many businesses get into generic, off-the-shelf Contract Hire packages that yield little positive impact.

Commercial Finance Network helps you find experienced vehicle lessors who are willing to mould the agreement to your requirements. This not only saves you a good deal of money, but also allows you to make the most of leased vehicles.

Let us know of your requirements by contacting us today and request a free, customised Contract Hire quote!