Business Leasing

Business Contract Hire: A Simple and Cost-Effective Solution

Business Contract Hire (BCH), also known as an Operating Lease, is a flexible and cost-efficient way for businesses to fund their vehicles. This long-term rental agreement is tailored to meet the specific needs of your business, with contract terms ranging from 12 to 60 months.

Why Choose Business Contract Hire?

BCH offers a range of advantages that make it a popular choice for companies:

• Minimal Capital Outlay: No large upfront costs, freeing up capital for other business needs.
• Fixed Monthly Payments: Simplify your budgeting with predictable costs.
• Improved Cash Flow: With reduced financial strain, you can better manage your company’s resources.
• Tax Efficiency: Rentals can be offset against business profits. For vehicles with CO2 emissions of 130g/km or below, there is no disallowance on the rental amount claimable for tax purposes.
• Reduced Administrative Burden: Road tax (Vehicle Excise Duty) is included, and optional maintenance packages are available.
• Flexibility and Support: Contracts are tailored to your mileage and business requirements, with ongoing advice and support.

Optional Extras to Enhance Your Lease

• Maintenance Packages: Cover servicing, tyres, and routine repairs.
• Breakdown Rescue Cover: For peace of mind on the road.
• Replacement Vehicle Cover: Ensure your business keeps moving in the event of a breakdown.
• GAP Insurance: Covers the shortfall between the finance balance and insurance value if the vehicle is written off.

Disadvantages of Business Contract Hire

While BCH has many benefits, it’s important to consider the following:

• Early Termination Costs: Ending the contract early can be expensive.
• Excess Mileage Charges: Additional charges apply if you exceed the agreed mileage.
• Vehicle Maintenance: The vehicle must be well-maintained and returned in good condition, or additional fees may apply.
• Ownership: You will never own the vehicle, as there is no option to buy it.
• Insurance: Fully comprehensive insurance is required.

Tax and VAT Benefits

BCH is particularly advantageous for VAT-registered businesses:

• Reclaim 50% of the VAT on the finance element for cars and 100% of the VAT for commercial vehicles and maintenance (subject to conditions).
• Monthly rentals are VAT-inclusive but reduced by the leasing company reclaiming VAT on the vehicle’s purchase.
• For contracts with maintenance, VAT on the service element is fully recoverable.

Additional Financial Benefits

• Off-Balance-Sheet Funding: Typically, BCH does not appear on your company’s balance sheet (subject to legislative changes), improving your gearing ratio and potentially increasing borrowing capacity.
• No Depreciation or Disposal Concerns: The leasing company absorbs the depreciation and resale risks, making BCH a hassle-free solution for fleet management.

Whether you need a single vehicle or a fleet, Business Contract Hire is a reliable and efficient way to manage your business transportation needs. Contact us to learn more or to discuss a tailored solution for your company.