Business contract hire: things to consider

There are a lot of factors to consider when choosing whether to lease a car or not; one of these choices includes whether you want to opt for a business contract hire or not.

We asked the business hire experts at Flexed for their expert opinion about the things that businesses should consider when choosing to lease a car and whether it will be beneficial to their business.

Business contract hire is the most popular way for businesses to lease their cars, this is because it’s considered to be a risk-free way to provide your employees with the opportunity to drive a company car. A business contract hire agreement does not permit the business to purchase the car, instead you would only be leasing it for the agreed contracted period of time. This means there is much less risk involved if the employee leasing the car suddenly decided to leave the company; you do not have the financial worry and burden of having to sell the car.

Furthermore, continuing with the financial perspective of business contract hire, it can be considered much more efficient for a business. As a business, you don’t need to worry about the cost of depreciation on the vehicle that you choose to hire; this is because you simply hand the car back without the hassle of trying to sell it for a much lower price than you purchased it.

Business contract hire is also the most tax efficient option for businesses; VAT companies often claim 50% of the VAT costs after the contract has ended. This is usually the much more financially viable option for businesses as it significantly reduces the costs. Moreover, maintenance is usually always included in the leasing contract so this is another way that businesses can expect the vehicle costs to be reduced even further. One of the most appealing benefits for a business choosing a business contract hire leasing deal is that 100% of VAT can be avoided. This is subject to the sole purpose that the car is being used for; if the car is used 100% for businesses reasons and not personal reasons, then 100% of VAT can be reclaimed. Obviously, this would be an attractive offer for businesses as it reduces the costs even further.

Providing that the car hasn’t travelled over the mileage allowance initially agreed in the leasing contract, then there are usually no additional costs to pay once the lease is up; you simply hand the car back to the leasing company without any additional worries.

There are still the obvious factors to consider when choosing whether to lease a car, including the length of the lease and the model of the car. A business must also consider these factors, despite whether they wish to choose a business contract hire or not.

With business contract hire, a fixed cost is usually calculated which is tailored to suit the needs of your business. Things like the average annual mileage, the length of the contract and the model of the chosen car will all contribute to the cost that will be calculated. A business may choose to lease a cheaper model in order to keep costs down even more, but they must consider the mileage costs too; if you go over the agreed mileage allowance then extra costs will be incurred.

In order to lease a car through your business there are obviously a number of documents that you would be expected to provide the leasing company with. This also includes the fact that your business would have to undergo a credit check to ensure that you have all the appropriate financial resources available to pay for the leasing contract.

As there are quite a lot of things to consider when leasing a car through business contract hire, it is imperative that you ensure that you make the right decision for your business. Remember to consider the financial aspects, as well as the risks involved.