The ins and outs of Contract Hire
Running a company-owned fleet vehicles can be both challenging and costly. To help you meet these challenges, various financing solutions are available to you, offering a means to effectively manage your fleet without the burden of owning the vehicles outright. One such solution is Contract Hire for businesses. This popular financing option provides a practical, cost-effective way to manage your fleet, making it an ideal choice for businesses of all sizes. This blog post will cover the ins and outs of Contract Hire, helping you determine if it's the right choice for your fleet.
What is Contract Hire?
Contract Hire (sometimes called ‘Operating Lease’) is a specific form of vehicle leasing. In simple terms, it's a medium/long-term vehicle rental agreement, allowing businesses to have access to new or used vehicles for a predetermined length of time and mileage, without the need for outright ownership.
How does it work?
Under a Contract Hire agreement, you pay a fixed monthly cost in return for the use of the vehicle. The monthly rental cost is calculated based on several factors, including the type of vehicle, the length of the contract, the agreed mileage, and the estimated residual value of the vehicle at the end of the contract.
One key feature of Contract Hire is that the risk of vehicle depreciation is held by the leasing company, not the business using the vehicle. This means you won't have to worry about selling the vehicles or dealing with potential value loss over time.
At the end of the contract term, the vehicle is simply returned to the leasing company (or the contract extended if you want to keep using the vehicle) offering a hassle-free way to manage a fleet.
This straightforward approach allows businesses to focus more on their core operations and less on their fleet vehicles.
Note: you may have to pay a final charge if you have driven beyond the mileage agreed in the contract or there is any damage to the vehicle which falls outside of reasonable fair eear and tear as noted in the guidelines produced by the British Vehicle Rental and Leasing Association BVLRA).
Benefits of Contract Hire
Contract Hire offers an array of benefits, from predictable budgeting and no residual value risk to comprehensive maintenance coverage.
If you're considering Contract Hire or want to explore other fleet financing options, the team at Alphabet is here to help.
Get in touch with us today on 01252 976 010 to learn more about how our Contract Hire solutions can be tailored to your needs.
