Business Contract Hire provides businesses with a risk free way of operating company cars. A fixed monthly cost is agreed at the start of the term and usually takes into account the following:
- Cost of vehicle
- Vehicle registration fees
- Road tax
- Funding costs
- Forecast residual value (the car’s estimated value at the end of the contract).
This makes budgeting straightforward and takes away the risk of a huge drain on cash flow for vehicle maintenance.
There is usually no option for the lessee to purchase the vehicle at the end of the contract, although in some circumstances the driver may have the option to acquire the vehicle at market value. Once the contract has ended the vehicle needs to be returned to the leasing company.