Business contract hire explained
If your business is exploring car and van finance options, you’ve probably come across Business Contract Hire (BCH). It’s a popular and cost-effective way to manage your company’s transport needs without the upfront costs and hassle of ownership. This guide explains how BCH works, who’s eligible, and what happens at the end of the lease contract.
What is business contract hire?
Business Contract Hire (BCH), also known as business leasing, allows companies to lease cars or vans for an agreed period. This is usually between 12 and 48 months, with fixed monthly payments.
At the end of the lease, the vehicle is handed back, avoiding the hassle of resale and the risk of depreciation. You can also add optional maintenance package for extra peace of mind too.
To understand how Business Contract Hire compares to other finance options, visit our guide on Contract Hire vs Leasing vs Hire Purchase.
What are the benefits of business contract hire?
BCH offers several advantages for managing vehicle costs and improving cash flow.
Fixed monthly costs
BCH provides a predictable payment structure with fixed monthly fees based on the vehicle’s value, contract length, and expected mileage. This makes budgeting and financial planning easier for businesses easier.
Lower monthly costs
Since you’re leasing rather than buying, BCH usually means lower monthly payments compared to financing or purchasing outright, freeing up capital for other business expenses.
Better cars
Leasing allows businesses to access newer, higher-spec vehicles without the high upfront costs. This is great for marketing and gives employees a better incentive.
No depreciation
Because the vehicle is returned at the end of the lease, you don’t need to worry about depreciation or selling it on.
VAT benefits
Businesses can reclaim up to 50% of the VAT on lease payments for cars and up to 100% for vans used solely for business purposes, offering potential cost savings.
Flexible contracts
BCH agreements can be tailored to suit your business needs, with options for contract length, mileage limits, and maintenance packages.
How are business contract hire rates calculated?
The cost of a BCH agreement depends on the vehicles on the road value, depreciation rate, contract length, and mileage limit. Adding a maintenance package can help with cost control.
Who can use business contract hire?
Businesses of all sizes can take out a Business Contract Hire, including sole traders, partnerships, limited companies, and even charities. To qualify, you’ll need to pass a credit check and show that your business is actively trading with a suitable income or profit level. However, each finance provider will have its own specific conditions.
What happens at the end of a business contract hire?
When the contract ends, the vehicle is returned to the leasing company. As long as it’s within the agreed mileage and in good condition (allowing for fair wear and tear), there are no extra charges. Excess mileage or damage beyond fair wear and tear may incur additional fees.
Get the right business contract hire with Synergy
Here at Synergy we offer a range of BCH options to suit different business needs. With competitive rates and a straightforward application process, our account managers make it easy to manage your fleet. For more details on business leasing, check out our business leasing FAQs.
If you’re ready to explore your options, get in touch with us today for expert support.
