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Contract Hire (CH) is a fixed term and mileage-based agreement for a period usually between 2 and 5 years. It is important that your agreement reflects your predicted annual mileage.
The vehicle will not belong to you at any point in the agreement and so you cannot sell the vehicle. You pay an initial rental followed by an agreed number of fixed monthly rentals which are subject to VAT for the specific period of hire you have chosen. At the end of the agreement the vehicle must be returned to the contract hire company.
Benefits of Contract Hire:
Hire Purchase (HP) allows you to spread the cost of the purchase of the vehicle at a fixed rate of interest. You will pay an initial amount which is followed by fixed monthly payments over a fixed term of up to 5 years. The vehicle belongs to the finance company until the last payment is made at which point you become the owner.
Benefits of Hire Purchase
Finance Lease (FL) is often used for LCVs and is a fixed term rental agreement. You will pay an initial rental followed by subsequent monthly rentals and sometimes followed by a larger final rental which will be based on the expected value of the vehicle.
Finance Lease (FL) differs from Contract Hire in that at the end of the agreement you must sell the vehicle to a third party. You will receive a large proportion (usually 97.5%) of the sale price with the balance of the sale proceeds (usually 2.5%) being paid to the finance company. If the agreement has a large final rental and the sale price is less than the final rental, you will be required to make up the difference.
Benefits of Finance Lease:
