Lease21 Contract Hire
The most popular choice for any VAT registered business no matter how big or small your fleet.
Contract Hire – You hire the vehicle for a set period at an agreed annual mileage. You pay a single fixed payment each month, this includes Road Fund Licence. If required, payments can include all servicing and maintenance including tyres.
Contract periods typically vary between 12 and 48 months, there are no large initial payments to be made, can be as low as one monthly payment. VAT is payable on rentals but is partially or totally reclaimable by VAT registered companies depending on the use of the vehicle.
At the end of the contract you return the vehicle without the worry or cost of disposal
The key benefits of contract hire to you are:
- All costs are off balance sheet
- The vehicle is owned by the funder, it does not appear on your company’s balance sheet
- The removal of capital assets from the balance sheet can improve the your companies gearing (borrowing to asset ratio)
- Fixed monthly costs
- A fixed monthly payment is charged for the duration of the contract which allows for accurate budgeting
- VAT Benefits
- Contract hire has significant VAT benefits, the funder can claim back the VAT on the purchase price of the vehicle. These benefits are passed onto you. As the user you can claim back 100% of the VAT on the servicing element and 50% of the finance element.
- Financial Risks
- The funder takes all the risks involved, the resale value of the vehicle, the maintenance of the vehicle and any change in interest rates
- Minimal Administration
- As the funder is supplying, the maintenance and is disposing of the vehicle, your administration is kept to a minimum. Outright Purchase of an existing fleet.
- Known as “Sale and Lease Back”, the existing fleet is purchased at an agreed price and is leased back to the client. Significant Cash Flow advantages can result from a “Sale and Lease Back” agreement.