Fixed monthly costs
Contract hire is a fixed-cost form of motoring. For a set monthly payment, you get the use of a vehicle for an agreed duration and mileage that suits your business. The fee takes into account the vehicle’s price when hired, its forecast mileage during the contract and its estimated residual value at the end. As long as you have not exceeded the mileage and the vehicle is in a fair condition, you just return it at the end of the contract, with no further cost. For an extra monthly fee, you can ask your contract hire company to take care of nearly every hassle associated with car ownership, whether it is maintenance, servicing or replacement vehicles.
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Claiming VAT
VAT is 100% reclaimable on the cost of a vehicle when it is solely used for business, regardless of whether you buy it or contract hire it. However, the situation is different if a vehicle is also used privately. While a contract hire customer can still reclaim 50% of the VAT charged on the finance cost of such a vehicle, the purchase can reclaim zero VAT. Another benefit is the fact that the leasing company that owns the contract hire vehicle can reclaim the VAT on it (because they are solely using it for business) and pass this on in the form of a reduced rental rate.
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