8 reasons to consider Contract Hire for your Fleets

1 - Improves cash flow

Purchasing fleet vehicles ties up your company’s financial resources from the high initial outlay, whereas Contract Hire releases these funds which can then be used elsewhere in the business. Even if your business wasn’t cash-rich and you were to finance a purchase rather than buy vehicles outright, Contract Hire tends to cost less per month than finance would.

2 – Provides Accurate Budgeting

You can obtain Contract Hire agreements that include servicing and maintenance therefore almost eliminating paperwork. These fees are expertly calculated by your provider and included in the monthly fee so you have no surprises. Paperwork is almost eliminated and budgets are tightly controlled so you can forecast monthly costs for up to five years. Contract Hire in this form can help to give you complete transparency to the whole life cost of your fleet.

3 - Reduces Administrative Burden

Fleet management can be hugely time consuming in terms of administration and paperwork. If you opt for Contract Hire then your provider takes care of most of this for you. Your time is then freed up to invest in other areas of the business.

4 - Improves Company Image

You will have access to the most modern and presentable vehicles with a disciplined replacement program. With Contract Hire you will be able to keep the image of the company maintained to a high standard without risk of becoming outdated. In addition to this you will be able to take advantage of the latest up-to-date technological and safety advances.

5 - VAT Benefits

With Contract Hire the provider can reclaim the VAT on the purchase price of the vehicle and pass this on to the customer. Once the vehicle is on the road, you will be able to claim back 50% of the VAT on the finance element if the vehicle is also used for personal use, or a full 100% if only available for business use. In addition to this you can also claim back 100% of the VAT on the maintenance element of the monthly payments.

6 - You don’t have to worry about depreciation

By purchasing your fleet vehicles you will suffer the initial high outlay cost, but also come under fire when it comes to selling on your vehicles due to the heavy depreciation of motor vehicles. With Contact Hire you will not need to worry about the depreciation of the vehicle as it is not owned by you, but also your provider will be able to purchase their vehicles at significantly reduced rates due to their purchasing power and will therefore only pass on minimal depreciation costs to the customer. In general Contract Hire removes any of the risks involved in ownership, including depreciation, servicing costs and the eventual sale.

7 – Provides Peace of Mind

There are usually a selection of cost options available for Contract Hire, you can have peace of mind knowing that your breakdown and replacement vehicles are covered, routine maintenance and repairs are scheduled and undertaken on your behalf, fleet insurance is included, and often mileage reviews can be undertaken to review usage and ensure you do not go too far under or over your contract mileage. Not only is everything managed for you, but you will also benefit from reduced downtime due to high levels of service and maintenance.

8 - Off balance sheet funding

Contract Hire is currently classed as an operating lease, which means that until 2019 (when a new approach to lease accounting comes into place) these vehicles do not show as depreciating items on your balance sheet. They are classed as a revenue expense and are therefore shown in the profit and loss account.

Remember, if you don't have Motor Fleet Insurance included in your Contract Hire agreement that this is an essential area to look into with the help of a specialist broker.