Businesses often require vehicles for various reasons, such as transportation of goods and services or for staff transportation. One of the biggest decisions faced by businesses when it comes to acquiring vehicles is whether to lease or hire them. In this article, we`ll delve into the differences between business lease and contract hire, and how to decide which option is best for your business.
A business lease is an agreement between a business and a leasing company to rent a vehicle for a set period of time. The business will typically pay a deposit upfront and monthly installments throughout the lease term. The main benefit of a business lease is that it allows businesses to acquire new vehicles without the cost of ownership. It is also a popular option for businesses that require flexibility in their fleet management.
One downside of business leasing is that the business is responsible for the maintenance and servicing of the vehicle throughout the lease term. Furthermore, when the lease term ends, the business will have to either extend the lease or return the vehicle to the leasing company. This can be disruptive for businesses that require a consistent fleet of vehicles.
Contract hire is similar to a business lease agreement, where a company can agree to rent a vehicle for a set period of time. However, the main difference is that the leasing company is responsible for the maintenance and servicing of the vehicle throughout the lease term. This can be an attractive option for businesses that want to avoid unexpected maintenance costs.
Another benefit of contract hire is that businesses can often negotiate a fixed monthly payment, which can make budgeting easier. Furthermore, at the end of the lease term, the business can simply return the vehicle to the leasing company and start a new contract with a new vehicle.
However, it is worth noting that contract hire can be more expensive than business leasing, as the leasing company is taking on the additional responsibility of maintaining the vehicle. Additionally, businesses will also have less control over the maintenance and servicing of the vehicle, which can be an issue for businesses that require specific customizations or upgrades.
How to Decide
When deciding between business lease and contract hire, businesses should consider their fleet management needs and budget. If a business requires flexibility and the ability to change their fleet regularly, business leasing might be the best option. On the other hand, if a business wants to avoid maintenance and servicing costs, contract hire can be a good option.
Businesses should also consider the tax implications of each option. In the UK, there are specific tax allowances available for businesses that lease or hire vehicles for business use. It is worth consulting with a tax expert to understand how these allowances apply to your business.
In conclusion, deciding between business lease and contract hire requires careful consideration of your fleet management needs, budget, and tax implications. Both options have their benefits and drawbacks, and businesses should assess which option is best suited to their unique circumstances.