Leasing & Contract Hire Explained

When you lease a vehicle you are making your priority the USE of that vehicle rather than its OWNERSHIP. On a FINANCE LEASE you accept responsibility for the final value of the vehicle at the end of the period for which you have agreed to pay rentals for its use, and the maintenance of the vehicle also remains your responsibility throughout. This type of lease is declining in popularity as the disposal of the vehicle at the end of the lease can be loss-making, complicated and time consuming and maintenance costs cannot be guaranteed for the period of the lease. Nevertheless there may be circumstances in which a Finance Lease is suitable. Our Business Centre associates can advise you, via the phone, fax or email links on this page.

By far the most popular form of Leasing is CONTRACT HIRE, through which the vehicle is hired by the LESSEE [either a company or a private individual] for an agreed period at a fixed rental per month, and simply handed back to the owner/funder [the LESSOR] at the end of the agreement. Agreements can be for as little as 18 months or as long as five years: the contract mileage is agreed at the outset depending on the intended use of the vehicle. The disposal of the vehicle at the end of the hire is the responsibility of the owner/funder, not you the user, but you must keep the vehicle in good condition, subject to fair wear and tear. If you exceed the contracted mileage during the period of hire, an excess mileage charge will be levied. This excess mileage charge rate will be agreed at the outset. To provide the ultimate in budgetary control, Contract Hire can include all maintenance, tyres, replacement vehicle(s) and full breakdown and recovery services, or just some of these additional services can be selected. All agreed elements are consolidated into a single monthly rental. The vehicle is registered to the owner [the LESSOR] and all regular road tax costs are included in the rental amount. Rentals are subject to VAT on all leasing agreements.

Summary - Contract Hire for the Business User

• No balance sheet impact for the LESSEE - rentals are treated as revenue expenses
• Fixed cost, as the only variables will be fuel, insurance [and maintenance if a non maintenance contract selected]
• A percentage of the monthly rental may be offset against liability to corporation tax
• 50% of VAT on rentals reclaimable if vehicle has private usage content
• 100% of VAT on rentals reclaimable if used solely for business use
• 100% of VAT on maintenance contract element reclaimable regardless of use
• Accelerated tax benefits in first year if large advance rental paid (subject to maximum)
• Contract hire company administers vehicle
• Maintenance contracts available
• No risk to the hirer [LESSEE] in the value of the vehicle at end of contract

Summary - Contract Hire for the Personal User

• Fixed cost as the only variables will be fuel, insurance [and maintenance if non maintenance contract selected]
• Maintenance contracts available
• No risk to the hirer [LESSEE] in the used value of the vehicle at end of contract
• Low monthly rentals when compared to full-payout finance agreements
• Benefit from buying power of CVS Leasing
• Suits people who traditionally enjoyed benefit of company car but have now opted for cash in lieu or had company car option withdrawn
• No P11D "benefit in kind" impact

What Happens At End Of Contract?

• Vehicle will be collected from the address as advised on original contract details or returned to officially appointed agent of funding partner
• Excess mileage over and above that agreed on contract will be charged at the rate set at contract start
• Proof of full service and maintenance record [approved dealer invoices and service book entries] will be required if the vehicle was not the subject of a maintenance contract
• All original keys and spare keys must be returned with vehicle
• Any damage over and above fair wear and tear along with damage caused due to misuse or negligence is chargeable (full details available at contract start on request)