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Business Contract Hire

Business Contract Hire is a hire agreement between any trading business (sole trader, LLP, Ltd or PLC) and a finance company. The finance company owns the vehicle, and the lease is essentially paying for the depreciation in value of the vehicle during the contract duration.

How does Business Contract Hire work?

If your company chooses to take out a Business Contract Hire on a brand new vehicle, you will be hiring it for a specified period of time (e.g 2 years) and make monthly rental payments for it.

If yours is a VAT registered company, you can reclaim from 50% to 100% of the VAT payments. If your company is not VAT registered, you can choose to spread the VAT costs across the term of the lease by incorporating it into your monthly rental. Your payments can usually be offset against taxable profits (special rules apply to cars).

Is my company eligible?

Contract Hire is available to sole traders, limited companies, partnerships and self-employed people who are financially eligible.

What happens at the end of the contract?

At the end of the hire period the vehicle will be returned to the contract hire company. There is no option to purchase the vehicle at the end of the agreement.

Please be aware that any damage must be repaired prior to return, or this will be charged in addition to the contract.


Throughout the hire period, the vehicle will belong to and be registered to the finance company. You will not be the registered keeper of the vehicle.


  • Better Cash Flow Management - Your business is only paying for the depreciation of the vehicle over the length of your lease contract. Therefore the total cost is much lower compared to taking out finance repayments on a car or buying one outright. This frees up more cash for your business to spend on development and growth.
  • Repayments can be claimed as a company expense - If the cars you lease emit equal to or less than 130g/km of CO2, you can claim back 100% of the rental payments against tax. If the CO2 emissions exceed this, you can claim back 85% of the rental payments against tax.
  • 50% of your VAT on contract hire payments can be claimed back and 100% of VAT on maintenance can be reclaimed.
  • There is no need for vehicle administration as the leasing company handles all administration of the vehicle throughout your contract, which eliminates the need for businesses to spend valuable resources doing this in-house.
  • Increased return on investment (ROI) - Leased cars are not counted as assets. Therefore your balance sheet will show an immediate improvement in the 'rate of return' on capital employed (via the asset value of the balance sheet being reduced).

Terms Explained

  • Initial Payment - This is your first payment, which is usually due 7-10 days after you receive your vehicle. It is a larger amount than the rest of your payments throughout the lease contract. It will be calculated in a multiple of your 'standard' payments (usually 3, 6 or, in rare cases, 9 times the amount).
  • Number of Monthly Payments - As standard car leasing contracts last either 2, 3 or 4 years, this is split down into monthly payments so you can select your contract length as required.
  • Miles Per Annum - On every contract there is an agreed amount of miles that the user is allowed per year. However, the mileage use isn't checked until you return the car at the very end of your contract; so as long as you average out to your selected miles per annum there won't be any issues. If you do go over your limit, there will be a small surcharge per mile. This varies from car to car, so check with your sales advisor for specific models.
  • Maintenance - This is an optional extra which covers all routine maintenance, servicing, tyres, batteries, exhausts and any necessary car repair costs but not accident damage.

Please note: The above information is for guidance purposes only. As a responsible lender Associated Credits Limited recommends prior to entering into any form of legal contract companies and individuals seek the guidance of an accountant or suitably qualified independent professional advisor.