A simple and cost effective way to fund any number of vehicles.
Business Contract Hire (BCH) is based on a fixed term contract, where customers pay an agreed monthly charge, for the use of a vehicle for a previously agreed period. This is usually between 2-4 years and in between 1-9 payments as an initial payment to the manufacturer, once the vehicle has been delivered. For example:- 6+23 = 6 monthly payments initially, then 23 monthly payments after that.
The Contract Hire Company reclaims the VAT on the original purchase, which reduces your monthly rentals (which are + VAT). Contract Hire is a very popular choice for VAT registered companies as they can claim back 50% of the VAT on the finance element for cars and generally 100% for commercials (subject to no private use, no exempt turnover and not being on the Flat Rate VAT Scheme).
On contracts with maintenance the VAT on the service element is 100% recoverable. One of the major benefits is that there are no disposal worries as the future value is underwritten by the leasing company. Another benefit of Contract Hire is that it is generally ‘off balance sheet funding’ (subject to legislation change) which means it can improve your gearing ratio (assets to borrowing ratio) and therefore possibly your borrowing ability in the future.
The car is owned and registered by the Funder, who tax the car each year.
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