Contract Hire Factsheet
Please see the finance agreement terms and conditions for full details.
Business Profile: Business looking for fixed monthly repayments without the option to own the vehicle. Contract Hire gives you the chance to drive a new vehicle every few years, with relatively low monthly rentals and no worries about the vehicle's resale value. Contract Hire is effectively a long-term rental – you pay a fixed monthly fee to use the vehicle for an agreed time period and number of miles. Under a Contract Hire agreement, you never own the vehicle as title remains with the Contract Hire Company and you have to hand it back at the end of the term.
At the Beginning of the Agreement
Under a Contract Hire agreement, you usually have to pay an advance rental in advance this can vary from 1 to 12 month's equivalent rentals. However, this may vary according to the Contract Hire Company.
During the Agreement
You'll make fixed monthly payments in accordance with your Contract Hire agreement. As with all rental agreements, there are some restrictions you need to bear in mind:
- If you cancel your contract and return the vehicle early you'll probably have to pay an early termination fee, or may even be liable to pay all the outstanding rental payments.
- You won't be able to modify the vehicle in any way – for example, adding a tow-bar – without permission. However, you can ask the Contract Hire Company to make modifications before you take it.
- If you exceed the agreed mileage, you'll have to pay a penalty for this additional mileage at the end of the agreement. Please see the agreement for full details of any such penalty charges.
At the end of the agreement
You have no right to purchase the vehicle and become its legal owner. If you want the option of owing the vehicle at the end of the agreement, Contract Hire is unlikely to be a suitable finance option for you. At the end of the agreement you must instead return the vehicle to the Contract Hire Company in "good repair and condition" (taking into account "fair wear and tear"). If you have exceeded the agreed mileage, you'll also have to pay a penalty for this additional mileage at the end of the agreement (see the agreement for full terms and conditions).
Advantages of Contract Hire
- Low, fixed, monthly payments.
- Your monthly payments will include the cost of annual vehicle road fund tax.
- With Contract Hire you don't have to worry about the depreciating value, warranty expiry, or selling it on – that's for the Contract Hire Company to consider.
- You may also have the option of including a maintenance package to cover the cost of routine servicing, replacements tyres, breakdown cover and relief vehicle options.
- VAT is charged on the rental and 50% is unrecoverable if the vehicle is used for any private mileage (cars)
- All VAT on the maintenance element is fully recoverable
Things to remember
- As a Contract Hire is a form of hire agreement without an option to buy at the end of it, the Contract Hire Company will actually own the vehicle throughout. You must therefore have fully comprehensive insurance for the term of the agreement.
- Without an option maintenance package, you are responsible to maintaining the vehicle in accordance with the manufacturer's warranty and servicing schedule. The leasing Company may stipulate where servicing and the replacement of tyres must be carried out.
- Be careful how you estimate your annual mileage as you'll be charged for each additional mile when you return the vehicle, which may not be suitable depending on your business.
The vehicle may be repossessed if you do not keep up the repayments and you may also incur additional charges and costs. Thinking carefully about your circumstances, you should ensure that the repayments are affordable now and for the duration of the agreement. You are not obliged to make use of a finance agreement arranged by Jennings Motor Group.
You can find out more about this, and other finance options, at www.moneyadviceservice.org.uk