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Company car
tax liability Get
It
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competitive quote"
Contract Hire
How it works
The Contract Hire company calculates the residual
value for the vehicle based on the age, length of hire and
the mileage it will be covering. They charge the user a
monthly rental to cover depreciation over that period plus a
funding charge, along with any add-on services required such
as maintenance. The user has no risk in ownership and has a
predictable monthly cost. The user effectively pays just for
the use of the vehicle.
Popular
with...
Companies who are VAT registered.
Risk
The funder assumes the risk of the residual value of the
vehicle.
Advantages
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Low initial outlay
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The costs are predictable and risk-free
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The user has no risk of depreciation and
disposal
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The vehicle is off balance sheet
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The rentals can be offset against the
taxable profit
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The administration and management burden
can be transferred to a third party
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Maintenance of the vehicle can be
included as an option
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If the vehicle is used solely for
business (i.e. pool car, commercial vehicle, daily
rental) the user can reclaim 100% of the VAT on the
rental. If it used for both business and pleasure, the
user can reclaim 50% of the VAT on the finance element
of the rental and 100% of the VAT on the maintenance
element if included
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The contract generally includes road
fund licence at the current rate for the complete term
of the agreement
Disadvantages
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It is sometimes costly to early
terminate the agreement
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It is important to correctly assess your
annual mileage as an excess mileage applies at the end
of the agreement. It may however be possible to
reschedule your mileage during the contract if you
incorrectly estimate it, or your circumstances change
Summary
The major beneficiary of the August 1995 VAT rule changes.
Overall, a convenient and hassle-free funding method with
tax and VAT advantages.
"Contact us now for a
competitive quote"
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