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Business Contract Hire:  What You Need to Know


This guide gives you the facts about Business Contract Hire to help you make your decision.


What is Business Contract Hire?


Business Contract Hire also known as Contract Hire or an Operating Lease, is a long term rental agreement.

You pay a monthly fee to use each leased vehicle for a set time and within a mileage limit.

The lease contract is normally fixed for 24 to 60 months and you choose the length you need for your business. The mileage limit is based on the annual mileage for your vehicles.


How Does Business Contract Hire Work with VAT and Corporation Tax?


Rental payments are tax deductible and so reduce how much corporation tax you pay. 

If your car produces 110 g/km or less of CO2 you can claim 100% tax relief. For cars that create over 110 g/km of CO2, you can offset 85% of your leasing costs against corporation tax.

Also, if your company is VAT registered you can claim back 50% of the VAT on the lease costs of cars. This rises to 100% for commercial vehicles. But this assumes there is no private use, no exempt turnover and your company is not on the Flat Rate VAT scheme. 

And if your lease contract includes maintenance, you can recover 100% of the VAT.


What are the Costs?


The cost of your lease deal depends on the vehicles you choose, the contract length and the annual mileage of your vehicles.

During the lease, you’re also responsible for repair and maintenance costs of each vehicle.

To fix these costs, you can add the Full Maintenance option to your lease contract for an extra monthly fee. This includes all regular servicing and routine maintenance. As well as MOTs, tyres, brakes, exhausts and batteries etc.

If you drive more than your mileage limit, you’ll have to pay an excess mileage fee. This is a pence per mile charge and is agreed before you sign your lease agreement.

There may also be vehicle damage charges if the vehicle’s condition is outside the "Fair Wear and Tear Guide" when it’s returned. You’ll get a copy of these guidelines at the start of your lease. 


Is Business Contract Hire Right for Your Business?


The Advantages:

The Disadvantages:


Have More Questions about Business Contract Hire?


Find out the answers to common questions on our website:  Business Contract Hire FAQs.


Who is trueFleet®?


We’re here to help you find the right vehicle at the right price.

From your initial enquiry to the delivery of your car or van, we manage the whole process to save you the hassle.

The prices you see on our website are the prices you pay. That’s because we work with leasing companies and dealers to find the best deals for you. There’s no extra charge for our services.

We’re a leasing broker member of the British Vehicle Rental & Leasing Association (BVRLA). And we’re authorised and regulated by the Financial Conduct Authority (FCA).

Based in Huddersfield in the heart of Yorkshire, we’ve got over 29 years’ experience of finding the perfect cars and vans. As a result, you’ll enjoy special discounts and terms.


Have a question? Pick up the phone and we’ll talk you through it.


Call us on 01484 866218contact us or email to talk to Paul O’Leary.

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