Business Contract Hire | What is it & how does it work?
Business contract hire (BCH) is a vehicle leasing solution that allows you to use a car or van for a fixed monthly fee over a set period, typically 2 to 5 years, without owning the vehicle.
It is commonly used by businesses that need reliable vehicles for day to day jobs, deliveries, site work or client visits, without the cost or commitment of purchasing outright. Instead of tying up capital in purchasing vehicles, you lease them through a finance provider. At the end of the agreement, you simply return the vehicle and can upgrade to a new one if needed. This makes business contract hire a practical option if you want to keep your business moving while protecting cash flow.
How does business contract hire work?
Business contract hire is designed to be simple and predictable, giving you control over your costs.
Here is how it works:
- You choose the car, van, or fleet your business needs
- You agree a contract term, usually between 24 and 60 months
- You set an annual mileage based on how your business uses the vehicle(s)
- You make fixed monthly payments
- At the end of the agreement, you return the vehicle(s)
You can also choose to include a maintenance package, helping you avoid unexpected repair costs.
Is Business contract hire right for your business?
Business contract hire could be a good fit if you:
- Want to avoid large upfront costs
- Need the vehicles but don’t want ownership responsibilities
- Need flexibility to upgrade vehicles regularly
- Rely on vehicles to support day to day operations
It is commonly used by limited companies, sole traders, and partnerships across a wide range of industries.
What are the benefits of business contract hire?
If you are looking to manage costs and reduce financial risk, business contract hire offers several key advantages.
Fixed monthly costs
Your payments are agreed upfront, making it easier for you to plan and manage your cashflow.
No ownership risk
You do not need to worry about depreciation or selling the vehicle later. You simply hand it back at the end of the contract.
VAT efficiency
Depending on how you use the vehicle, you may be able to:
- Reclaim up to 50% VAT on cars used for both business and personal use
- Reclaim up to 100% VAT if the vehicle is used solely for business
Access to newer vehicles
You can keep your vehicles up to date, helping your business maintain a professional image and benefit from the latest technology and upgrades.
Lower upfront costs
You can access the vehicles you need without a large initial payment, helping you preserve working capital.
Business contract hire considerations
Before choosing Business Contract Hire, it is important for you to consider the below points.
No ownership
You do not own the vehicle and it is returned at the end of the agreement. This may not suit businesses that prefer to own and keep their vehicles for longer than 5 years.
Mileage limits apply
Agreements include an annual mileage limit. Going over this may result in additional charges.
No equity built
As the vehicle is returned at the end of the agreement, you do not benefit from any resale value or equity.
Looking for business contract hire?
If you are considering business contract hire to acquire the vehicles you need, the right structure can make a real difference to your cashflow and flexibility.
At Time Finance, we support businesses with tailored vehicle finance solutions. Our expert team has over 27 years of experience in the vehicle finance market. They will work closely with you to source the right vehicles, find the best deals in the market, and arrange supply and delivery of the vehicles. We manage the process from start to finish, saving you time and effort.
If you would like to find out more or discuss your requirements, get in touch with our team today: [email protected]