A straightforward and often tax and cost effective way for a business to lease one or many vehicles of the same or different types, for the same or different periods and rental terms.
Typically abbreviated to BCH, this is a long term rental agreement of between 12 and 60 months.
You as the Contract Hire Company can efficiently recover the VAT from the initial purchase, so reducing your monthly rentals (which are subject to VAT). This makes Contract Hire a favored option for VAT-registered businesses, enabling them to reclaim 50% of the VAT on the finance component for cars, and typically 100% for commercial vehicles (provided there's no private use, no exempt turnover, and no participation in the Flat Rate VAT Scheme).
In agreements involving maintenance, the VAT on the service portion is fully reclaimable.
Notably, BCH alleviates concerns about disposal, as the leasing company safeguards the future value. Another notable advantage is that Contract Hire is typically considered 'off balance sheet funding' (pending legislative changes), potentially enhancing your gearing ratio (assets to borrowing ratio) and, consequently, your borrowing capacity in the future. This makes Contract Hire a strategic financial choice, combining tax efficiency, maintenance benefits, and improved financial positioning for businesses.