contract hire news

For many there are 3 different financial conclusions to come to when deciding if contract hire is right or even affordable for you, these are the monthly cost of the vehicle, the taxation your company is likely to be able to claim back, or be charged and the personal tax issues a contract hire deal may make to an employee with a company car.

Monthy Cost
The monthly payment is normally the buying price of the car minus the residual value after the contract hire period, divided by the relevant months and c of course some profit and interest added on.  The key figures are the residual value and any interest figure.  In short, the reason why many German cars are bought through contract hire are that they hold their value so well, to the pint it can be cheaper to drive a BMW that other cars that are cheaper to buy, but don not hold their value well.

Taxation To The Business
Most businesses can set the cost of the contract hire as a business expense, but the make and model of the vehicle can determine how much can be claimed back.  If the car lease vehicle is to be used privately, then only 50% of vat can be claimed. Then if the retail price of the car is above a certain amount, then you may only be able to claim a percentage of the monthly cost back.

Personal Tax
If you have a contract hire car as a company car, then you may be liable to personal tax on that vehicle.  Unlike many years ago, personal tax is based on the C02 emissions of the car and the retail price of the car. The co2 emissions tell you what percentage of tax against the value of the car you will be charged.

We have deliberately left out exact figures here as everyone’s tax situation and car variations will be different, but most will have to consider the 3 options above before they consider contract hire.

Contract hire enables you to have a vehicle of your choice on rental basis, usually for a period of 12 to 48 months. Typically, the vehicle is leased for about 3 year’s duration. The company supplying the vehicle calculates the monthly rental value payable by the lessee and takes deposit amount usually equivalent to three months rental value. Lessee prefers this arrangement as they do not have to incur the high costs of maintenance, funding costs and depreciation, but only have to pay the nominal monthly rental.

Advantages of contract hire:
1.    You do not have to pay an exorbitant amount of money car lease, unlike when you make a purchase.
2.    You remain unaffected by the depreciating value of the vehicle. Any fluctuations in its prevailing market rate will not affect you.
3.    If you are someone who likes changing cars frequently, then contract hire is the ideal platform for you to rent and drive new cars over a span of 1-3 years.
4.    You do not have to worry about the maintenance of the car.

If you have always dreamt of having a car, but your limited means never allowed you to make the purchase, then contract hire is the method which will make your dream come true. In present times, having your own vehicle is more of a necessity rather than a luxury. It is difficult to imagine a daily routine without having a car. Imagine what would you do in the case of an emergency? If someone in your family is critical and needs to be immediately hospitalised, and you don’t have your own vehicle, then the delay caused in arrival of ambulance could be crucial.

Following points are helpful in understanding how contract hire works:
1.    Search for the right deal: Internet is the best source to locate various companies offering cars on contract hire basis.
2.    Discuss your requirements: Discuss about the kind of a car you are looking for; hatchback, SUV or a high end luxury model, duration for which you plan to use it, contract fees and usage terms.
3.    Payment plans: Different companies use different payment plans in order to maintain a competitive edge over the other. Payment plans are usually segment specific, i.e. cars falling in a particular segment will have similar payment plans. It also differs with respect to late returning of the vehicle, over limit of mileage usage and damage caused during the lease period.
4.    Compare: Get different quotes from various companies to see what suits you the most and proceed with the company that is offering you the best deal.

Contract hire offers various benefits which makes it a preferred choice not only for individuals who wish to procure a car for personal use, but also for businesses who want to have a vehicle for business purpose.

Summary- Contract hire enables you to have a vehicle on payment of monthly rentals for a fixed duration of time. To get a vehicle through contract hire, search for the right deal, discuss your requirements with the company, see various payment plans which are offered and compare quotes given by various companies before choosing the one that suits your requirements the best.

By guest blogger Atul

For many search for a good contrct hire deal would involve searching through the many innacurate prices on the internet and then making several phone calls to establish which suppliers were offering the right prices and which when did not have those special offers still around. Leasebam has delivered a solution that appear to have soved these issues with real prices, delivered form real people responding to the request.

They have created the Leasebam system that does not have published prices but only responses from contract hire firms. Here is the video.

If Google searches are to go by, we tend to look for car lease, but in reality the most popular type of leasing a vehicle is contract hire. There was a time when hiring products was common practise such as TVs, Washing Machines and even Hoovers. This was not that long ago, when people just did not have the cash to buy modern appliances, and of course they were far more expensive compared to income than they are now.

But as hiring out home appliances has just about gone away, contract hire for cars has not, especially for business owners and often for employees also. There can be good reasons for this, for example keeping money in the business. If you add up the total cost of a car used through contract hire or one bought outright, in most cases it would be cheaper to buy. But this is not the end of the story because a business has to decide what it can do with that money should it stay in the business and choose to hire instead.

A £25000 purchase of a BMW for instance may cost a few grand more by opting for contract hire, but that 25 grand could produce a lot more money or left in the right business to grow or invest. For other business owners this money could be the cash flow that keeps the business turning over. So contract hire can have a greater value than just simple monthly payments.

A main factor of contract hire is its value after the contract hire period is up. Certain cars obviously have less depreciation and in theory these should be the cheapest cars for a contract hire deal. But it is also worth comparing the interest payments on the contract as this can make the biggest difference in month payments.

Another factor is buying power, there are some contract hire firms that buy so many cars that they get huge discounts only to pass these on to customers, in fact some claim their monthly premiums are based on the cost price of a car, as they can make their profits through the bonuses paid out from car manufacturers.