Contract Hire and Credit Checks

What it is in plain English

A credit check is mandatory for contract hire because you are essentially renting a vehicle from a finance provider who needs to assess your ability to make monthly payments. Funders review your credit history, current financial commitments, and electoral roll status to determine if you meet their internal risk criteria before approving the agreement.

How it works step by step

The process begins when you select your chosen van and submit an application through your dealership. The funder conducts a "hard" credit search to check your financial health, which leaves a footprint on your credit file. If your history meets their lending standards, they approve the contract, allowing you to sign the lease documents and arrange delivery of your vehicle.

What you pay and what is included

Contract hire agreements typically involve an initial rental payment, followed by fixed monthly installments for the duration of the term. These payments cover the use of the vehicle, and often include road tax and breakdown cover as standard. Maintenance packages can frequently be added to your contract for a predictable monthly cost to help manage servicing and repair expenses.

Who it suits and who it does not

This funding method is ideal for businesses that want to keep their fleet modern without the burden of depreciation or vehicle ownership. It suits operators who prefer predictable monthly overheads and plan to return the van at the end of the term. However, it is not suitable for those who want to own the vehicle outright or those with a poor credit score who may struggle to meet the funder's criteria.

Questions to ask before you sign

Before committing, ask your dealer about the total mileage allowance to avoid expensive excess mileage charges at the end of the contract. You should also clarify what the fair wear and tear policy entails so you understand the expected condition of the van upon its return. Always confirm whether servicing is included in your monthly rate or if it remains your responsibility.

FAQs

Is a credit check needed for contract hire and what do funders look at? Yes, a credit check is always required. Funders look at your credit score, history of meeting financial obligations, your business's credit profile, and your overall financial stability to ensure you can afford the monthly rentals.

Will a contract hire credit check affect my credit score? Yes, lenders perform a hard credit check during the application process, which typically results in a small, temporary dip in your credit score.

What happens if my credit check is declined? If you are declined, you may want to check your credit report for errors, consider a guarantor if the funder permits, or explore alternative finance options that might have different acceptance criteria.

Do I need a perfect credit score to be approved? Not necessarily. While a better score helps, lenders assess your application holistically, looking at your history of managing debt and your ability to comfortably afford the van lease payments.

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.