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Business Contract Hire Guide

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What is business contract hire?

Business contract hire (BCH) is a sought-after long-term vehicle rental agreement suitable for sole traders, partnerships and limited companies. The vehicle is simply rented over a number a set number of years (typically 2 to 4 years) for affordable monthly payments.

At the end of the contract, the vehicle is returned to the financial provider, freeing your business from the hassle of trying to sell the vehicle at a heavily reduced rate.

The concept of Business Contract Hire with Fleet UK is simple:

  • You choose a brand new or nearly-new vehicle that you want and is suitable for your business – car, van, pickup, etc
  • You can add functional options to a brand new vehicle
  • Fleet UK orders that vehicle through a franchised dealership, either using their existing stock or putting a build order into their factory
  • A Finance Provider (a.k.a. Funder) then purchases that vehicle
  • You are then in agreement with the Financial Provider that your business will rent your chosen vehicle from them, paying them a pre-agreed fixed payment each month, for the duration of the contract
  • The Funder then collects the vehicle at the end of your contract hire term and you get to pick a brand new vehicle again


Important features of Business Contract Hire

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  • Vehicle tax is provided during the term of the contract
  • Manufacturer’s Warranty
  • Roadside assistance cover
  • Free delivery of the vehicle to anywhere in mainland UK
  • Fixed monthly rental payments cover the hire of the vehicle


The monthly hire payments are calculated based on the following:

  • The cost of the vehicle
  • The length of the contract period
  • The anticipated residual value of the vehicle (how much it will be worth at the end of the contract)
  • The agreed mileage allowance you chose at the start of the contract


Who is eligible for a business lease car?

  • Limited companies
  • A partnership
  • A VAT Registered business
  • A Limited Liability Partnership (LLP)
  • A PLC
  • A charity
  • A local authority
  • Central government
  • An embassy
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Applying for finance as a business is slightly different from the personal lease process as there are different requirements that need to be met.

Every funder has its own requirements for business applications. Generally, you need to have been trading for 2 years and filed at least one set of accounts showing a positive net worth.

If no accounts have been filed and you are a new start company, some funders such as (but not limited to) Audi, Volkswagen, Skoda, Seat and, Mercedes will still accept an application with a supporting Directors personal guarantee.

If a company has filed only one set of accounts, Fleet UK recommends supplying the latest management accounts and three months business bank statements to support the application.




Sole Traders

Sole Trader finance applications work slightly differently as the funder will carry out a personal credit check, which strictly speaking is the same if someone was making a personal application.

There are many benefits to leasing a vehicle as opposed to buying one for sole traders. The affordable and fixed monthly payments make it easier for you to budget and manage your cash flow.

You get to decide the length of the contract and the annual mileage which suits your requirements. You can decide if you want to pay an initial deposit amount or a larger one to reduce the following monthly payments.


What is included in a business car lease?

A business car leasing deal includes road tax, manufacturer’s warranty, and free UK delivery to your door. You can add maintenance packages to your contract for an additional fee. This provides coverage as well as giving you peace of mind on minor damage, servicing, minor dents, or scuff.

Also, roadside assistance cover is provided by the car manufacturer, for a period between 12 months to 4 years depending on the vehicle brand.


Company car vs car allowance

More employers are offering employees the choice between a company car and a car allowance, which is paid into your salary and yours to spend how you see fit.

It’s wise to take some time to decide which is the best option for you, but if you choose to use the money for a lease car, you need to sign up for a personal contract hire deal, not a business one.

You will not have to pay Benefit In Kind on the vehicle as you would do with a company car, but you will have to pay VAT.


Advantages of business car leasing

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FIXED MONTHLY PAYMENTS

  • Minimal capital outlay
  • Fixed monthly costs to assist your cash flow and improve the accuracy of monthly budgeting
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NO DEPRECIATION RISK

It’s common for a lot of vehicles to lose around 50 to 60% of their value during the first three years. By leasing the vehicle the risk is taken on by the vehicle funder.

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NO NEED TO SELL

Don’t want the hassle, worry, and cost of trying to sell your vehicle privately? Leasing the vehicle allows you to hand back the keys and take out a new lease.

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DRIVE A NEW VEHICLE

As most leases last between 24 to 48 months your employees can drive new cars or vans fitted with the latest safety and in-car technology.

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VAT RECOVERABLE

100% of VAT is recoverable if the vehicle is used only for business purposes, or 50% if the car is sometimes used for private use.

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WARRANTY

All new or nearly new vehicles come with a manufacturers’ warranty, which in most cases will cover the length of your lease giving you peace of mind.

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ROAD FUND LICENCE

This is covered for the duration of the contract

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MAINTENANCE COVER

Breakdown cover is provided and can last between 12 months to 4 years depending on the vehicle brand. You can also take out optional maintenance cover to give you reassurance on minor scuffs, damage and servicing.


Disadvantages of business leasing

  • Early termination can be expensive
  • If you do more miles than stated in your contract you will be charged excess mileage for each mile over that stated in your contract. Please visit our ‘Excess mileage charge guide’ for more information.
  • You must look after the vehicle and return it in a well-maintained condition otherwise you will be charged for any damage over and above the BVRLA’s Fair Wear and Tear Guide. Please see our ‘End of Contract’ guide for more information.
  • You must have fully comprehensive vehicle insurance
  • You will never own the vehicle as there is no option to buy it


Are there tax benefits with using Business Contract Hire?

Please visit our 'Business Car Leasing Tax Advantages Guide' for information such as:

  • Does Business Contract Hire help your company accounts
  • Is leasing a vehicle tax deductible?
  • VAT and Business Contract Hire


What happens at the end of the contract?

At the end of the contract, the vehicle is handed to BCA Limited (British Car Auctions Limited) which means you’re free to lease another new vehicle without any outstanding financial obligation.

If you have exceeded the agreed annual mileage allowance there will be an excess mileage charge applied, which is typically worked out at a ‘pence-per-mile’ basis. Also, when returning your vehicle, it will be assessed by the BCA who will use the BVRLA’s Fair Wear and Tear guidelines. Damage which falls outside of these guidelines may be subject to penalty charges.

For more detailed information as to what happens at the end of contract, please visit our 'End of Contract Guide'.


How do I get started?

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Option 1 – Request a quote

You can request a quote via here and we will search for the best leasing deals available based on your requirements. We will get back to you in the same day.

Option 2 – Search for deals on our website

Check our special offers or use the quick finder tool on our homepage. There’s also an advanced search to help you pin down the right leasing deal for you.

Option 3 – Call us

If you would prefer to speak to someone straight away, no problem at all, just give us a call on
02392 245572 and you will have a dedicated account manager who will be on hand to give you any help and advice.



Why should you choose Fleet UK?

At Fleet UK, we’re specialists in supplying new or nearly-new vehicles for reasonable rates. Whether you’re a sole trader or a big business looking for a fleet of vehicles, we’ll provide you with a dedicated account manager who will find the right solution for you.

If you have any questions please call us on 02392 245572 and we will be glad to assist you.

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