Contract Hire

Contract hire is an ideal product for companies who want to avoid the financial risk of running their own vehicles, whilst also looking to reduce the administrative burden of buying, servicing and disposing of their vehicles.

Your company arranges a contract on each vehicle through YourFleet for a pre-determined period at a fixed monthly rate. Ownership of the vehicle remains with the leasing company - along with the associated risks - and at the end of the contract the vehicle is simply returned.

The key benefits of contract hire to your business are:

fixed monthly cost
A fixed monthly rental is charged for the life of the contract and the initial payment is usually based on three months' rentals. Fixed monthly costs for the duration of the contract enables more effective budgeting. This in turn, in conjunction with the cost effective monthly rentals, improves cashflow.

VAT benefits
The leasing company can claim back the VAT on the purchase price of the new car, with these benefits being passed on to you. Once the vehicle is on the road, you can then claim back 100% of the VAT on the servicing element of the rental cost and 50% of the VAT on the finance rental cost.

reducing your financial risks
Managing the risks involved in running a vehicle fleet is very important and is easily achieved if you choose contract hire. The leasing company takes all the risks involved in setting the residual values, handling the maintenance costs and interest rates. That leaves you to simply pay the monthly contract hire rental, provide insurance and fuel the vehicle.

reducing administrative burden
As someone else is supplying and disposing of your cars and also, if you choose, taking care of the maintenanced arrangements, the administration demands on your business are kept to an absolute minimum.

off balance sheet funding
Under contract hire your vehicles do not appear on your company's balance sheet as they are owned by the leasing company. The removal of capital assets from your balance sheet can enhance a company's gearing (borrowing) ratio. A proportion of the monthly rentals are also allowable for tax purposes.

Finance Lease

Offering many of the elements of ownership of a vehicle, Finance Lease whilst also offering cashflow and tax advantages. A fully amortised Finance Lease (without a final balloon payment) is often seen as an effective method of funding a vehicle where its end of contract return condition(due to excessive wear and tear) may fall below that expected under the terms of a Contract Hire agreement.

The vehicle is sold at the end of the agreement with the user retaining nearly all of the proceeds of the sale. Alternatively, the vehicle may be retained by the user, by paying a nominal rental (termed a ‘peppercorn’ rental).

Hire Purchase

A tried and tested method of achieving vehicle ownership.

To all intents and purposes the operator is effectively borrowing the ‘money’ to purchase the vehicle. Whilst the interest costs can be offset against profits, for tax purposes, the operator is responsible for the disposal of the vehicle at the end of the agreement. If a final value (or ‘balloon’) is put in place this is not guaranteed, with the vehicle operator being responsible for the shortfall, if the vehicle’s value is lower. However, should the vehicle’s value be higher, the operator keeps the proceeds.

There is no VAT element to the monthly payments, with only the VAT on the original purchase price of commercial vehicles normally being recoverable.

Lease Purchase

Lease Purchase is essentially Hire Purchase with a Balloon Payment at the end of the contract.

This balloon payment is not guaranteed - so the owner of the vehicle is responsible for paying this at the end of the term (usually by selling the vehicle and settling the balloon with the proceeds).