Van Contract Hire Explained

If you are thinking about buying a new van for business or personal use, the number of van financing options available can be quite overwhelming.  One of the most popular financing options is “Contract Hire” – this is because it is highly cost effective and easily managed.
Getting credit is where we can help or growing your fleet of vans

What is van contract hire?

Often to referred to as ‘vehicle leasing’ because contract hire is the most common form of vehicle leasing agreement; contract hire essentially means that you have full control of a vehicle, it is in all respects yours but at the same time you do not actually ‘own’ it. Instead of owning the vehicle you make an agreement with the leasing company to make fixed monthly payments and at the end of he agreed contract term (usually between 12 and 47 months). 12 months contract hire is a popular option.

Why contract hire?

The first reason to contract hire, is cost. You do not pay the full price of the vehicle, what you really pay is the difference between the estimated ‘residual value’ of the van (what it will be worth at the end of the contract hire) and the original retail price. The residual value – is a calculation of the vehicles condition, mileage and depreciation.

Consider this, if you bought a van outright, or bought a van on finance, where you would be paying for the van for a much longer period (maybe up to 5 years or more); you would also be paying interest. At the end you own the car but its value would have depreciated massively. So when it comes to buying a new car later, you Would be paying out large sums again – as opposed to contract hire, where you could just take up a new contract hire van.

Contract hire PROS and CONS

Contract hire is right for some people and then again not right for others. For most people, it is the best way to run a vehicle, especially for companies. Perhaps some people just like the idea of ownership whilst others like the idea of being able to walk away at the end having gained.  There is no option to buy like with a personal contract purchase.

Some contract hire agreements also include maintenance – so all you need to think about is tyres, fuel and insurance – this in itself has potential for huge savings and fewer headaches. Most vans, if they are going to go wrong, go wrong within the first few years of purchase.

You know exactly how much you have to pay and when you have to pay it – easy to predict and budget for.

VAT registered businesses can reclaim 50% of the total payment made on a contract hire agreement and 100% of the maintenance package costs. There are also gains from hire rental allowances.

Is contract hire right for me?

If your mileage is generally predictable, you know roughly how many miles you do per week, month, year – then contract hire is a great option for you.

On the other hand, if you travel a lot and do a lot of mileage, then your monthly payments will be higher. If your mileage is generally unpredictable then you may exceed your mileage limit and additional charges may be incurred.  You should access your driving habits before considering contract hire as an option.

If you have a business that has a lot of vehicles, contract hire can be very beneficial. Benefits include avoiding large down payments, flexible fleet sizes and always having up-to-date van models – not to mention not needing your own in-house mechanics and the tax gains.

Non-status contract hire

UK non status contract hire can benefit customers with adverse credit. If you or your company find yourself in the situation where you do not meet the underwriting requirements of major leasing companies – then you may seek out to find non–status contract hire. This essentially means that your case in taken individually on its own merits rather than being automatically rejected on certain criteria. Some companies have more than 40% rejection rates. However, the cost is of non-status contract hire will often be slightly higher as you may be considered a higher risk. This is different to van hire purchase

It is not just for those with adverse credit however, some people are often rejected on technicalities such as marital status/couple status, you may be a new start up business or if you are business that does a lot of trade internationally some creditors may not take this into account, in which case non status contract hire or non-status Van contract hire with full self-drive hire could be right for you.

Here at Swiss Vans we have a large range of vans available for contract hire from Volkswagen Transporters and Caddys to Pickups like the Volkswagen Amarok. In addition to 12 month van contract hire, we also have 12, 18, 36, and 47 month van contract hire available.

Check out vansales.com for details.