Question 1

What is contract hire for a commercial vehicle?

Accepted Answer

Contract hire is the most common form of commercial vehicle leasing. You pay a fixed monthly rental to use a vehicle for an agreed period and mileage. At the end of the contract you return the vehicle, you never own it and the monthly cost is fully tax-deductible for VAT-registered businesses.

Question 2

What is a finance lease for a commercial vehicle?

Accepted Answer

A finance lease lets you use a vehicle for a fixed period with monthly payments, but unlike contract hire, the vehicle appears on your company balance sheet. At the end you can pay a final 'balloon' payment and take ownership, or refinance.

Question 3

What is the difference between contract hire and finance lease?

Accepted Answer

Both involve monthly payments for a vehicle without ownership. The key difference is contract hire keeps the vehicle off your balance sheet and is easier to account for and finance lease puts it on your balance sheet but gives you the option to purchase at the end.

Question 4

Is contract hire tax deductible for businesses?

Accepted Answer

Yes. Contract hire rentals are fully deductible against VAT Tax for most businesses. This makes it one of the most tax-efficient ways to fund a commercial vehicle fleet. Fixed monthly rentals 50% of VAT can be claimed on the rental if there is any private use of the vehicle.

Question 5

What happens at the end of a contract hire agreement?

Accepted Answer

You return the vehicle to Automotivate Leasing and we provide end-of-contract services. It is inspected against BVRLA Fair Wear & Tear guidelines. If the vehicle is in acceptable condition and within mileage, there are no additional charges.

Question 6

Can I buy the vehicle at the end of a finance lease?

Accepted Answer

A finance lease gives you the option to pay a final balloon payment and take ownership, or sell the vehicle and keep a proportion of the proceeds, which Automotivate can assist with. Contract hire does not include a purchase option.

Question 7

What mileage limit can I set on a contract hire agreement?

Accepted Answer

Mileage limits are agreed at the start of the contract, typically from 10,000 miles per year. Setting an accurate mileage is important as underestimating can result in excess mileage charges at the end.

Question 8

What happens if I exceed my mileage allowance?

Accepted Answer

Excess mileage charges are calculated per mile above your contracted limit and are set out in your agreement. These are charged at the end of the contract based on total miles driven vs agreed total.

Question 9

Do I need a deposit for a commercial vehicle lease?

Accepted Answer

Most lease agreements require an initial rental equivalent to 3, 6, 9 or 12 monthly payments upfront, followed by fixed monthly payments. This is not technically a deposit, it is an advance rental payment.

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