• Contract Hire Vans - Van Leasing Agreement Explained

Contract Hire Vans - Van Leasing Agreement Explained

Contract Hire Vans in Sutton London

 

Contract Hire Vans is a hassle-free option when it comes to financing your van. It’s basically hiring a van for a longer period. You can enjoy fixed-cost motoring, a low deposit and low monthly repayments which makes this the ideal way to finance your new van. What's more, with CH your road tax is automatically renewed at no extra cost.

You just pay the monthly rental covering the mileage allowance, taxes and maintenance and enjoy driving a new van. You can also remove the van from your balance sheet, avoid the issue of depreciation, avoid slipping into negative equity and, at the end of the term you can hand it back for a brand new one or simply walk away.

Because the rental fee is set in line with the van's depreciation, the CH offer is often more cost-effective than choosing to buy your van outright or on a Hire Purchase deal.

How does Contract Hiring work for vans?

A Contract Hire for Vans agreement is similar to the finance lease deals, with the difference being that at the end, the van will be returned to the van leasing company. There will be an upfront payment (1 to 21 months) plus a fixed monthly rental fee. The price will be influenced by the mileage and is based on the list price of the vehicle.

 

Van Lease Deals

 

What happens at the end of a CH van lease deal?

When the CH agreement ends, you must return the vehicle to the van leasing company. If the mileage is within the estimated limit and the car is in its expected condition, the agreement ends with no additional fees. Surpassing the stated mileage and excessive usage of the vehicle will attract an extra cost, as mentioned in the van leasing deal that you will sign.   

 

What are the main benefits of this type of contract?

  • Cash flow – by opting for van leasing (CH), the van won't show on your balance sheet. This way you don't need to worry about cash flow or the problem of depreciation and negative equity.
  • Fixed monthly rentals – helps to aid budgetary control and cash flow.
  • Low deposit – normally the equivalent of three monthly rentals. £0 deposit is not available on a lease vehicle.
  • Tax advantages – monthly rentals include VAT which, if you're registered, you can reclaim every quarter.
  • Tax relief – you can offset 100% of the monthly rentals against profits
  • Mileage restrictions – you choose the mileage that's right for you and your business. If you need to do more than you initially thought, then any excess mileage will simply be charged at the end of the term (the pence per excess mileage charge will be clearly indicated in your car leasing offer).
  • Depreciation – the van's depreciation is the risk of your leasing provider, not you.
  • Optional maintenance packages – you can choose to pay a little extra per month to cover any costs associated with servicing, roadside recovery, repairs and tyres.
  • Road Tax included – your tax will automatically be renewed.

 

Can you get out of a Contract Hiring agreement?

Yes, it is possible to end your van hire contract earlier. However, this will come with a cost. The ‘terms and conditions’ section should mention the fees applied for exceeding the mileage and early cancellation. Read the contract in detail and consider all the possible options before any decision is made.

 

Is Business Hire a good Idea?

This is a good choice, mostly popular for VAT-registered companies. It is well suited for companies that wish to drive new vehicles and upgrade when the lease deal ends, have included a maintenance package, or simply avoid the negative equity risk, as they don’t own the vehicle. Overall, a van leasing contract is one of the hassle-free van leasing deals, used by different businesses, from sole traders to corporate large fleets.

 

How can we help you decide what type of van leasing is the best for you?

Loads of Vans is committed to helping all-size businesses find the best van finance deals according to their true needs, at competitive prices. We are the official dealer for Renault, Peugeot, Citroen, Fiat and Nissan, but we also work with other top brands in the industry like Vauxhall, Ford and Volkswagen. We can hire all range of sizes - small, medium and large vans, petrol, diesel or electric. Electric vans are great for fuel economy, but their performance will depend on the weight and type of cargo you transport.

Choose the make that you want, its colour and options such as electric folding mirrors or van cruise control, commit to an annual mileage of up to 60,000 miles per year, make the offers initial payment (usually from 3 to 9 months) and you’re ready to go.

Road tax, servicing, and even tyres can be included in the monthly rental, so you will be responsible only for the fuel and van insurance. 

business contract hire payment explained

 

Read our CH frequently asked questions for more information in the section below:

 

  • What type of lease is CH?

Contract Hire is a type of car or van leasing, that allows you to drive a new vehicle without owning it. It’s made on a fixed-term period and estimated mileage and you pay a fixed monthly rental, returning the vehicle to the lessor at the end. The fee covers taxes, service and the agreed mileage.  

 

  • What information do you need for business hire and van leasing deals?

Before being accepted for leasing, you will have to pass a credit check. Most of the leasing companies will request you to have your personal details (email, name, DOB, 5-year address history), director’s details, the company’s name and registration number (if LLC), history of trading and bank details.

 

  • Do you own the vehicle after the deal ends?

With this type of contract, you do not own the vehicle and in the end. The van must be returned to the leasing company, which is the legal owner and the one in charge of all the risks.

 

  • What are the benefits of business CH?

  1. Better budget planning due to fixed monthly payments
  2. Depreciation, service and maintenance are supported by the van leasing company
  3. Best suited for VAT-registered businesses – it can be reclaimed up to 100%
  4. Using a new van or vehicle for lower costs

 

  • What are the disadvantages of Business Hire?

  1. Zero equity at the end, unlike Finance Lease
  2. Early settlement may attract high fees
  3. You won’t own the car at the end
  4. Mileage limitation and paying extra for exceeding it

 

  • Do business hire rentals attract VAT?

Yes, they do. Both personal and business hire leases are subject to VAT. However, it can be claimed only by tax-registered businesses and not by private individuals.

 

  • Can you claim VAT on Business Hire?

Any business that is VAT registered can reclaim it 100% if the car or vehicle is used only for business purposes and up to 50% if it’s used privately. Private individuals cannot reclaim it when leasing a van and pay it included in the monthly rentals.

 

  • Does business hire include interest?

Yes, the monthly rentals that you pay will cover interest and depreciation. The depreciation value remains constant, so the payment will be fixed. The crediting company is the legal owner of the vehicle, purchasing it so it can be leased. The interest comes as compensation for using it.

 

  • Can I request hiring a used car?

No, because these lease contracts are made only for brand new vehicles. For used cars, you will need different types of financing deals such as a contract purchase (CP).

Visit our van finance deals page to see what other options are available.

 

  • Can I sell a CH car?

 No, it is not possible because the finance company is the vehicle’s owner and with this type of contract you can only lease it for a set period and return it at the end.

 

  • What is the difference between business and personal CH?

Both deals are similar, meaning that you lease the van for a set time, paying an initial deposit, interest, rental and returning it at the end. The main difference is in the way you are allowed to use the vehicle. On a personal lease, you won’t have any restrictions apart from the mileage. With a business contract, it must be used only for company purposes, but there are other financial advantages.

 

  • What is the difference between lease and business hire?

The main difference between the two is that a finance lease gives to the user the option of selling the vehicle when the agreement ends, whereas, with CH deals, the vehicle must be always returned to the leasing company.

 

Business Contract Hire (CH) is a popular choice for businesses, but it may not be always the best one, depending on the circumstances. Have a quick look at our van finance deals page to learn the pros and cons of all the options or read more about other types of financing like Hire Purchase (HP) or van Finance Lease.

We hope you have all your questions answered. We know that sometimes finance deals can be confusing, so don’t hesitate to get in touch with us if you still need more information to decide. You can do it by using the instant chat icon in the bottom right corner, our contact page form or simply by phone.

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