How to choose a lease term: 24, 36 or 48 months

The options

Most business contract hire agreements run for 24, 36 or 48 months. Some funders offer 12, 30, 60 months or other lengths, but these three are the ones most businesses compare first. Each suits a different set of circumstances.

24 months is the shortest of the three. It suits a business that wants to change vehicles often, expects its needs to change soon, or wants a newer vehicle with the latest safety and driver-assistance equipment. Monthly rentals are usually higher over a shorter term, because the vehicle's depreciation is spread across fewer payments.

36 months is the most common term for business contract hire. It tends to balance the length of commitment against the monthly rental, and most manufacturer warranties still cover the vehicle for the whole agreement. It is a sensible starting point if you have no strong reason to go shorter or longer.

48 months spreads the cost over a longer period, which can mean a lower monthly rental. The trade-offs are a longer commitment, a vehicle that will be older and higher mileage by the end, and the possibility that the warranty runs out before the agreement does. It can suit a business with stable needs that keeps vehicles for the long haul.

Term is only one of the things that shapes a quote. Annual mileage, the vehicle itself, the initial rental and any maintenance package all play a part, so it is worth comparing like with like.

What to check

Before you settle on a term, work through the following.

• How long you will need the vehicle. If the contract, a project or a change in the business could end your need for it, a shorter term may be safer. Ending a contract early usually means paying a substantial part of the remaining rentals, so check the early termination terms before you sign.
• Your annual mileage. A longer term means more total miles. Check that the mileage allowance is realistic across the whole agreement, as excess mileage is charged per mile at the end.
• Warranty cover. Compare the manufacturer's warranty length and mileage limit with the term you are considering. Gaps can lead to repair costs you had not planned for.
• Maintenance. If you add a maintenance package, check what it covers and whether it runs for the full term.
• Vehicle type. Vans, particularly those worked hard, can show wear sooner. Check the fair wear and tear guidelines for the term you choose.
• Cash flow and tax. A lower monthly rental may help cash flow, but total cost across the term matters too. Your accountant can advise on how rentals are treated for your business.
• Technology and regulation. If you are considering an electric or hybrid vehicle, think about how quickly the technology and charging options may change over the term.
• Total cost. Compare the full cost across the agreement, including the initial rental, any fees and the end-of-contract conditions, not just the monthly figure.

Next step

If you know roughly how long you will need the vehicle and how many miles you will cover, you have enough to start comparing. Tell us the vehicle you are interested in, your expected mileage and the terms you are weighing up, and we can look at options from our funder panel for each term so you can compare them side by side.

contracthire.tv is a trading name of Swiss Vans Ltd, authorised and regulated by the Financial Conduct Authority (FRN 668283) as a credit broker, not a lender.

Questions people ask

Which lease term is most common for business contract hire?

36 months is the most common, though the right choice depends on how long you need the vehicle, your mileage and your budget.

Can I end a contract hire agreement early?

Usually yes, but it normally means paying a significant part of the remaining rentals. Check the early termination terms before you sign.

Does a longer term always mean a lower monthly rental?

Often it does, because the cost is spread over more payments, but this is not certain. The vehicle, mileage and funder all affect the quote, so compare options for each term.

What happens if I go over my mileage allowance?

Excess mileage is charged per mile when the vehicle is returned. It is better to set a realistic allowance at the start than to pay excess charges later.