Business cars are a major perk that employees and business owners alike can benefit from. But which company car model is right for your business? Determining the best company car scheme for your business will depend on your unique needs.
Should more than one employee have access to a vehicle? Do employees want the option to buy their vehicle after its lease is up? Will the vehicle be driven for both business and personal purposes?
This article will explain what business contract hire is, its benefits and how it might fit into your company car scheme.
What Is “Business Contract Hire?”
Business contract hire refers to the leasing of a vehicle for business purposes over a long period of time. This method of vehicle leasing is also known as company car leasing. The leasing period typically lasts two to four years and businesses pay a fixed amount of money each month.
Read More: What Is A Company Car Allowance?
Benefits of Business Contract Hire
There are many benefits to business contract hire, or company car leasing. Below are just a few of the primary benefits to this form of vehicle leasing.
1. Fixed monthly payments
The monthly cost associated with business contract hire includes the road tax, maintenance and servicing of the vehicle. There will be no surprise bills to pay at the end of the month if your car breaks down or requires repairs.
2. No depreciation
Because your business doesn’t own the vehicle, you won’t have to worry about selling it at the end of the contract period. Moreover, a fixed amount of depreciation will be determined before leasing the vehicle, so regular wear and tear will not affect your monthly premium.
3. New vehicles
Most company car leasing agreements last between two and four years. Thanks to this quick turnaround, you’ll be able to drive a new car regularly.
4. Reduced administration
Taxes, license plate renewal, MOT certificates and more are handled by the company car leasing company. All you have to do is sign the contract, accept the keys and drive safely. The rest of the administration work is taken care of for you.
5. VAT Recovery
If a vehicle is used for business purposes only, 100% of the VAT is recoverable. If the vehicle is driven as a company car (i.e. used for both business and personal trips), then 50% of the VAT is recoverable. Either way, your business pays less VAT tax.
Read More: Learn More About Tax Rules On Company Cars
How Business Contract Hire Saves Time & Money
Business contract hire can save your business both time and money. Because the vehicle is leased from another company, you don’t have to waste time with maintenance checks or repairs — all of that is taken care of for you!
Moreover, you’ll still pay a fixed amount of money each month to lease the vehicle even though its value will depreciate as it experiences normal wear and tear. You don’t have to worry about losing money when selling the car, because you don’t have to sell it in the first place! Simply hand back the keys and lease a newer car.
In general, company car leasing is much more cost-effective than buying a vehicle outright and is the smarter choice if you’re in the market for a business vehicle.
FAQs About Business Contract Hire
Still unsure whether business contract hire is the right choice for your company? Here are some of the most frequently asked questions regarding company car leasing to make your decision easier.
Read More: Learn More About Fleet Insurance For Business
Who is Eligible for Business Contract Hire?
It doesn’t matter how large your business is or what field you work in. Business contract hire is appropriate for sole proprietors, partnerships, limited liability companies, public limited companies and charities.
However, you do need to pass a credit check and show proof that you are currently trading and making a profit. Typically, businesses must have been trading for a minimum of two years to be eligible for a business contract hire.
Read more: FORS Online Accreditation Explained
Is the Business Car Tax Deductible?
If a vehicle is driven solely for business purposes, then you can recover up to 100% of the VAT. If a vehicle is driven for business and personal purposes, you can recover up to 50% of the VAT.
Does Business Contract Hire Have a Maximum Mileage?
Yes, most contracts will cap the number of miles that may be driven on a leased vehicle. If you exceed the mileage limit, you may have to pay additional charges when you hand over the keys.
Can a Leased Vehicle Be Purchased at the End of a Contract?
No, a leased vehicle is typically not available for purchase at the end of a leasing period.
Tracking Leased Company Vehicles with Vimcar
Business contract hire can save companies time and money, and there are many other benefits to leasing vehicles for business purposes. Once a vehicle has been leased, it’s recommended that you install a GPS tracker or truck tracker within it. GPS trackers like Fleet Geo make it easier to track business miles and can alert you of potential theft attempts.
