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.
Most vehicles will lose value from the moment they leave the showroom. In a contract hire deal, you return it to the leasing company at the end of the contract period, and they take the residual value risk. If you include things like maintenance and servicing, you are also protected from any unseen rise in these costs.
Free up capital
Leasing a vehicle instead of purchasing it means you are not tying up capital in a rapidly depreciating asset. You can invest the money that you are not paying upfront in growing your business or reducing debts.
Off balance sheet funding
Vehicle leases do not have to be shown on a balance sheet, which will improve a company's liquidity ratio, gearing and return on assets.
Little or no initial payment with contract hire.
Costs are predictable and risk-free.
Payments take into account the vehicles future residual value, so the user doesn't have to repay the entire capital cost.
With Contract Hire, the administration and management burden can be transferred to a third party if taken with maintenance.