Opening a new business mean a lot of expenses, set ups, equipment purchase and figuring out what can be put through your tax return or not. Buying a vehicle is an important decision in any business, some would need a vehicle fleet whilst other just one, being a car or a van.
As a business owner or sole trader the decision of buying a vehicle outright or leasing it can be a daunting process. What’s the best option? What tax relief would I get with each? How would depreciation would affect my business? These are questions new or existing business owners make before making any equipment purchase.
Nowadays there are many ways of buying a new vehicle, finance lease, lease purchase, hire purchase, contract hire, and more.
For the purpose of this article I’m going to focus on Business Contract Hire and its benefits to businesses.
Contract Hire is a long-term vehicle rental agreement for sole traders, self-employed, partnerships and limited companies. It is particularly beneficial for VAT registered business or sole traders as you can claim back 50% of the vehicle’s VAT.
Contract Hire terms go for 2 or 3 years with 3 or 9 upfront payments and a set of annual miles. Any miles above this limit would be charged at a contract set rate at the end of the term.
After the contract hire term has ended the vehicle is then returned to the finance company who will decide how to manage the vehicle.
- The finance company remains as the owner of the vehicle meaning it won't appear in your business Balance Sheet
- Rentals can include vehicle maintenance (this is optional)
- Annual miles are based on your requirements
- TAX is calculated over the full period term
- Rentals are worked out based on your requirements
- The option of having a lower or higher deposit (3 or 9 months)
- Fixed rentals for the entire term, making easier the budget planning
- Flexible terms to meet your business requirements
- It removes depreciating assets from your company’s balance sheet, and the associated risks of owning vehicles
- Maintenance can be included in the monthly rentals removing the worry of having to pay extra for vehicle maintenance
- If you're VAT registered you can claim back 50% of the finance
Early termination can be quite expensive
If you go above the contracted annual miles you will be charged “by the pence” all extra miles. Depending on the how many miles you have gone above this can result in being a hefty charge.
You must return the vehicle at the end of the contract in a well maintained condition. Any damages above the Fair Wear & Tear will be subject to further charges, and depending on the damages these can end up being quiet expensive.
Vehicles must have full comprehensive insurance for the full term
You won’t own the vehicle as the contract hire doesn’t allow for this option
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Crusader Vans is a trading style of Crusader Vehicles Ltd. We are a credit broker and not a lender and will introduce you to a set panel of lenders. We may receive a commission or other benefits from our finance providers should you decide to enter into an agreement with them as a result of our introduction or, from another credit broker to whom we refer you, should we be unable to arrange funding for you. This is reflected in the monthly lease rate that you pay for your vehicle. We will receive financial remuneration which may be variable or pre-set dependent on the product and the volume that we place with that organisation. The amount of commission received may vary depending on the funder selected.
We are authorised and regulated by the Financial Conduct Authority. Registered No : 631262 We are an Appointed Representative of Autoprotect (MBI) Limited which is authorised and regulated by the Finacial Conduct Authority for insurance mediation purposes (FRN 312143).
Registered in England & Wales with company number : 06203641 | Data Protection No : Z2007710 | VAT No : 929 9924 56
Registered Office : Crusader House, High Street, Buxted, East Sussex, TN22 4LA
Disclaimer: All vehicle images and descriptions are for illustration and reference purposes only and it is your responsibility to check the vehicle and specification is fit for your purpose. All vehicle leases are subject to status and credit approval and subject to change at any time. Calls are recorded for training and monitoring purposes. Errors and Omissions Excepted (E&OE.)
