Fleet or contract hire has many benefits, yet many business owners can be ignorant to the potential savings to be made. Contract hire allows businesses to lease company cars for a set period of time (typically between 2 and 4 years) before returning the car to the lease company. Monthly payments are made to cover the cost of the vehicle hire and upkeep. This easy method of supplying a company car is becoming increasingly popular thanks to the host of benefits this article will outline.
Reduced VAT
One of the most appealing benefits of contract hire is the huge VAT reductions. If your car will be leased and used only for business purposes, you can avoid 100% of VAT. If you will be using your contract hire for personal reasons as well, you can still reduce your VAT bill by 50%.
Tax relief
The monthly payments for a contract hire car can be offset against taxable profits, which reduces the amount of tax that your business pays. If you choose a hire car that emits 110g/km CO2 or less in the first year of rental, you can claim back 100% of the car’s value. The amount you can claim back reduces in proportion to the amount of CO2 that your rental car emits.
No market value risk
One of the huge drawbacks of purchasing a car outright is that as soon as that vehicle has left the dealership, its worth depreciates. A car that is frequently used over a period of several years can lose the majority of its value, so when you re-sell your vehicle you are guaranteed to make quite a large loss. By hiring a contract vehicle you are eliminating this factor as you won’t have to sell the car in the open market and the cost of contract hire will be much less than the loss you would have made in buying and selling your car.
Cheaper than long term ownership
The reduced VAT and relatively low cover costs mean that utilizing a contract hire can work out significantly cheaper than ownership, especially if you will need to replace your car every few years because, as mentioned above, car value decreases at an alarming rate.
Upkeep of a professional image
An added perk of using contract hire is that you are guaranteed a new and professional looking car that is frequently replaced with a newer model. This promotes a successful image for your company that can encourage other companies and potential clients to view your business in a positive light – you may even find that using a contract hire service could raise the amount of custom your business receives.
Caversham Vehicle Hire offer low-cost hire on minibuses, Luton vans, cars and people carriers in the Reading and Newbury area. We pride ourselves on our friendly and professional service and extensive breakdown assistance, aiming to ensure that our customers have complete confidence in the services we offer. For more assistance, please feel free to contact us with more details of your requirements.