Extending a Contract Hire Agreement

What it is in plain English

A contract hire extension allows you to keep your current van beyond the original lease term on a rolling monthly basis or a fixed-period arrangement. This practical solution helps businesses avoid the immediate pressure of sourcing a new vehicle while ensuring your fleet remains fully operational without interruption or the need to start a brand-new contract from scratch.

How it works step by step

First, you must contact your finance provider approximately three months before your current contract concludes to express your interest in extending. They will calculate a revised monthly rental based on your current vehicle's updated value and remaining lifespan. Once you agree to the new terms, you simply sign an extension agreement, and your lease continues seamlessly until you choose to hand the vehicle back.

What you pay and what is included

During an extension, your monthly payments typically decrease because the vehicle has already depreciated significantly from its initial value. Your extension agreement will usually include continued breakdown cover and road tax, mirroring the benefits of your original deal. However, you should clarify if your maintenance package still applies, as some service contracts are tied strictly to the initial mileage limit.

Who it suits and who it does not

This option suits business owners who need extra time to plan their next fleet purchase or those who are perfectly happy with their current van's reliability. It does not suit those whose vehicle is nearing its mechanical end-of-life or anyone whose business requirements have changed, such as needing a larger load space or better fuel efficiency for high-mileage routes.

Questions to ask before you sign

Always ask your provider if the extension will reset your mileage allowance or if the total limit remains fixed from the start. Verify if your current maintenance or tyre replacement service is still covered under the new monthly rate. Finally, confirm the notice period required if you decide to terminate the extended agreement early, as this can vary significantly between different finance houses.

FAQs

Can a contract hire agreement be extended and how? Yes, most contract hire agreements can be extended by contacting your leasing provider before your current term ends. They will assess your vehicle and provide a new monthly quote based on a revised contract period.

Will my monthly payments change if I extend my lease? Yes, monthly payments typically reduce during an extension because the vehicle has already undergone its steepest period of depreciation, making the ongoing cost more manageable for the lender.

Are there mileage limits on a contract hire extension? Yes, you will generally agree on a new total mileage limit for the extension period. It is vital to monitor this closely to avoid excess mileage charges when you eventually return the van.

Can I switch to a different van at the end of the extension? Absolutely. An extension is simply a temporary measure; at any point during your rolling agreement, you can hand the van back and start a brand-new contract for a different, newer model.

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