1. Generally, up to 5-year term, but it’s very common to see leases of a 3-year term.
2. Fixed Cost monthly payments.
3. Lease company buys the vehicle and takes the risk associated with reselling at end of agreement.
4. Possible to add maintenance, tyres, road fund licence and roadside assistance to the lease cost.
5. Fixed cost maintenance covers all routine in life running costs.
6. No depreciation risk.
7. Balance sheet efficiency, the car as an asset is not on the businesses balance sheet, this improves balance sheet ratios and the VAT recovery on purchase is reflected in lower rental costs. (This may not be applicable to PLCs and some Public Sector bodies who publish under IFRS).
8. Tax-efficiency, contract hire is allowable as a trading expense (subject to certain tax restrictions). 50% of the VAT on the finance element and 100% of the service element of your rental is recoverable where there is any private use.
9. Rentals are treated as a revenue item; this leaves capital budgets unaffected which is particularly beneficial where there are restrictions on capital expenditure.
10. Cashflow control, rentals are fixed for the duration of the agreement. Contract Hire is an extremely tax efficient method of funding a business vehicle, as the rentals can be offset against taxable profits. For cars emitting CO2 of 50g/km or less, full tax relief is available on the rentals. With electric vehicles omitting zero CO2, funding via contract hire is an attractive solution.

Hire Purchase

1. Flexible, monthly payments can be reduced by increasing deposit.
2. No additional end of contract charges. Generally an option to purchase fee applies, then the renterwill own the vehicle at the end of the agreed term.
3. Unlike a lease there is no VAT charged on the monthly finance payments. A favoured method of funding for many businesses which allows ownership of the vehicle.