Contract Hire - Suitability explanation
Contract Hire is a fixed term and mileage-based agreement for the hire of a car or van for a period usually between 2 and 5 years. It is important that your agreement reflects your predicted annual mileage. The vehicle will not belong to you at any point in the agreement and so you cannot sell the vehicle. With a Contract Hire agreement you pay an initial rental followed by an agreed number of fixed monthly rentals and all rentals are subject to VAT at the prevailing rate for the specific period of hire you have chosen. At the end of the agreement the vehicle must be returned to the contract hire company.
Contract Hire may not be suitable for you in certain circumstances. For example:
- If you wish to own or buy the vehicle
- If you might need to change your vehicle early (early settlement will incur charges)
- If you would like to shorten your period of hire by pre-paying
- If you do not know what your predicted mileage will be
- Business type restrictions, e.g. vehicles to be used as Taxis or for Driving Schools
- If you plan to export the vehicle or use abroad for extended periods
Benefits of Contract Hire
- Fixed monthly rentals
- Choice of period of hire from 2 years and a total mileage up to 120,000 miles, maximum 40,000 per annum
- For peace of mind motoring optional maintenance plans are available, for an additional fixed monthly fee
- Road Fund Licence is included for the duration of the agreement, though charges may apply reflecting future increases
- The vehicle is simply returned at the end of agreement, removing concerns about disposal values and depreciation
Taking care of the vehicle
- You must ensure the vehicle is comprehensively insured at all times
- You must have the vehicle serviced and maintained by a main franchised dealer in accordance with the manufacturers requirements. If you include a maintenance package please note the funder may decline to settle any related charges if the total mileage on the agreement is exceeded
- At the end of the agreement the finance company will assess the vehicle condition based on the standards set down in the BVRLA fair wear and tear guide, refurbishment charges may apply
- If you exceed the total mileage charges will apply, please refer to your quotation
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