The term “contract hire” refers to the most common form of leasing agreement and means that you agree to take control of the vehicle for a set period of time. However, despite being yours to drive and maintain, you never actually own it.
The “no strings” attitude attached to contract hire vehicles make it a popular choice for many businesses. However, it’s particularly favoured by those who are VAT-registered because of the great savings that can be made.
The “contract” refers to the agreement you make with the leasing company to make fixed monthly payments for an agreed period before returning the car at the end of the contract.
Your payment is calculated between the difference of these two prices, so essentially, the higher the residual value of your vehicle, the lower your monthly payment will be.
It’s really important to think about your driving habits when working out which is the right lease for you. Although contract hire is open to any business, if your mileage is high then your monthly payments will be higher as the vehicle’s depreciation will be increased, so this is something you need to bear in mind.
Contract hire is also perfect for any business looking to avoid large down payments on vehicles, update their fleet vehicles regularly and have the flexibility to increase or decrease the fleet size depending on staffing levels.