A first-time lessee's guide to contract hire

Contract hire is a way of paying to use a car or van for a fixed period without buying it. You pay a regular monthly rental, hand the vehicle back at the end, and never take ownership. For a business, that can mean predictable costs and no need to deal with selling the vehicle later.

This guide is for anyone arranging a lease for the first time. It explains the main choices, what to check before you sign, and how to take the next step. 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. We introduce you to funders, and any agreement is between you and the funder.

The options

Most first-time lessees face the same handful of decisions.

Car or van. Both are available on business contract hire. Vans suit trades, deliveries and anyone carrying tools or stock. Cars suit staff, directors and client-facing roles.

Length of contract. Terms commonly run from two to four years. A shorter term means a newer vehicle more often, while a longer one spreads the cost over more months. Think about how long you will realistically need the vehicle.

Annual mileage. You agree a mileage allowance at the start. Choosing it honestly matters, because going over can lead to excess mileage charges at the end.

Initial rental. Many agreements ask for a larger first payment, often expressed as a number of months' rentals. A bigger initial payment can change the monthly figure, so compare quotes on the same basis.

Maintenance. Some deals include servicing and tyres for an extra charge, while others leave maintenance to you. Neither is automatically better. It depends on how much you value fixed running costs against flexibility.

Fuel type. Petrol, diesel, hybrid and electric vehicles are all offered. Your usual journeys, access to charging and the tax treatment for your business are worth considering.

What to check

Read the quote and the agreement carefully before you commit. Points worth checking:

• The full cost, not just the monthly rental. Look at the initial rental, any admin or documentation fees, and the total payable over the term.
• Mileage allowance and excess charges. Find out the charge per extra mile and whether you can adjust the allowance during the contract.
• Condition on return. Funders usually apply fair wear and tear standards. Ask which standard is used and what counts as damage you would be charged for.
• Early termination. Contract hire is a fixed commitment. Ending it early can be expensive, so check what the terms say.
• Insurance and road tax. Check what is included. You will normally need to arrange your own insurance.
• Who the funder is. Make sure you know who you are contracting with and how to contact them.
• Eligibility. Funders assess each business application and make their own decisions. Having a credit check is normal, and no outcome can be assumed in advance.

If anything in the paperwork is unclear, ask before signing.

Next step

Decide roughly what you need: car or van, preferred term, estimated annual mileage and any must-have features. Then get in touch with us and we will talk through the options and approach funders on your behalf. There is no obligation to proceed with a quote, and we will explain the main terms in plain language so you know what you are agreeing to.

Questions people ask

Do I own the vehicle at the end of contract hire?

No. The vehicle belongs to the funder throughout, and you return it at the end of the term. If you want to own a vehicle, a different type of finance may suit you better.

Can a new or small business get contract hire?

It is possible, but each funder makes its own assessment and may ask for more information, such as accounts or a director's personal backing. We cannot say in advance whether an application will be accepted.

What happens if I go over my mileage?

You are usually charged a set amount for each extra mile when the vehicle is returned. It is worth estimating mileage carefully at the start, as changing it later may not always be possible.

Is maintenance included?

Only if you choose a package that includes it. Otherwise you are responsible for servicing and keeping the vehicle in good condition, and you should check what the agreement requires.