Contract Hire is available to any type of customer – whether business or personal – but, because of its structure and form, it is ideally suited to VAT-registered businesses because the VAT that rentals attract can be claimed back from Her Majesty’s Revenue and Customs (HMRC). This is even more important when hiring a commercial vehicle.
• Contract Hire is a method of funding the use of a vehicle for a set period of
time but not the ownership of it. This period is normally 2, 3, 4 or 5 years
• The rentals cover the depreciation of the vehicle and interest costs only during
the primary period of the lease.
• The interest is calculated on the ex-VAT price of the vehicle.
• The rentals attract VAT at the current rate. If hiring as a Personal Contract Hire (PCH) then you simply include the VAT in the monthly costs.
• Contract Hire agreements can be both regulated and unregulated under the consumer credit regulation depending on the nature of the customer and the total amount of rental payments.
• Maintenance or service contracts should be a huge consideration when looking at contract hire. This allows you to budget for manufacturer services, tyres etc. The only thing it would not cover you for would be windscreens. Please check out of Maintenance Guide for further details.