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What are the benefits
of Vehicle Leasing to
Contract Hire is sometimes referred to as an Operating Lease. It is a long term rental agreement. Contracts can range from 24 to 60 months and are tailored to the businesses requirements. The Contract Hire company reclaims the VAT on the original vehicle purchase, which therefore reduces your monthly rentals (which are plus VAT).
Contract Hire is a very popular choice for companies that are VAT registered, as they can claim back 50% of the VAT on the finance element for cars and generally 100% for commercials (subject to no private use, no exempt turnover and not being on the Flat Rate VAT scheme). For contracts including maintenance, the VAT on the service element is 100% recoverable.
One of the major benefits is that there is no disposal risk, as the future value is underwritten by leasing company. Another benefit of Contract Hire is that it is generally "off balance sheet funding" (subject to legislation changes) which means it can improve your gearing ratio (assets to borrowing ratio) and therefore possibly your borrowing ability in the future.
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