What is Business Contract Hire and how does it work?

What is Business Contract Hire?

Business Contract Hire (BCH) is a method of long term car leasing for businesses. It is a fixed-term agreement for a business or sole trader to hire a vehicle from a motor retailer for the purposes of being used as a company vehicle. 

Once the fixed term of the contract is complete, the business is obligated to return the vehicle without the option to purchase. BCH deals can usually last between 2-4 years.

What are the benefits of Business Contract Hire?

There are many benefits for businesses who take out Business Contract Hire agreements, which is why they are very popular. 

The main benefit of a BCH deal is that it provides a business with a car or van with low monthly hire costs and a lower than usual initial rental payment, compared to a regular Personal Contract Hire. The initial rental payment on a BCH is often the value of x3, x6, or x9 monthly payments, depending on the length of the deal. 

The monthly lease payments are agreed ahead of time and are fixed for the duration of the deal, regardless of whether the car or van hired increased in overall cost during the contract. 

Vehicle Excise Duty (VED), more commonly known as Road Tax, is also accounted for at the start of the contract and will not rise throughout the duration of the BCH deal. 

Business Contract Hires usually last between 24 and 48 months, allowing for businesses to budget more efficiently, with the outgoings set out for a known length of time. 

A flexible mileage allowance on the contact is also required, giving you the chance to best serve your business' needs.

One aspect of a BCH deal is that there is never an option for the vehicle to be purchased when the contract hire term ends. The car is simply handed back to the dealership. 

This low burden of administration and ownership gives business owners the chance to avoid the hassle of having to sell the car or worrying about the depreciation of its value, freeing up even more time to focus on your business at hand. 

Typically, a new car will depreciate around 20% in value per year which can be quite a daunting prospect of new car ownership. Value depreciation is taken into account ahead of time and will be reflected in the initial terms of the contract.

The chance to drive a brand-new car every few years is also a big draw for BCH users. Who wouldn't like to stay up to date with the latest models and enjoy cutting-edge tech and performance, complete with low monthly payments?! 

There are also big savings to be made on a Business Contract Hire agreement. VAT registered companies can claim back 50% of VAT paid on their business vehicles. This can lead into the hundreds, and even thousands of pounds, across the full length of a contract. 

Even better news for business van drivers, who can claim back 100% of the VAT paid across their BCH's duration!

Do I need to pay for car maintenance with Business Contract Hire?

As with any car or van, they are legally required to regular service and maintenance. A mechanical service is necessary on all vehicles, every 12 months, following their registration. 

However, maintenance and servicing costs can be factored into the monthly rental payments when agreeing on the BCH to avoid any extra costs going at inconvenient times for your business.

Is there a downside to Business Contract Hire?

As will all financial arrangements, there can be a handful of downsides compared to the considerable benefits. 

An early termination of the BCH can prove costly if you have a change of heart part-way through the contract. Excess mileage charges will also come into force if you exceed the annual mileage limit agreed from the start of the deal - often on a pence per mile basis. It certainly pays to work out exactly the terms you require for your company vehicle ahead of time! 

Additional charges can also be accrued for any damage or excess wear and tear on the vehicle when the time comes to hand the car back to the dealership. The guidelines for costs of repairs are outlined by the British Vehicle Renting and Leasing Association (BVRLA). 

And, of course, a possible downside of a BCH is having to hand back the car at the end of the contract if you have fallen in love with it. But then there's always the option of simply renewing your contract in a brand-new model!

What cars are available with Business Contract Hire at Chapelhouse?

At Chapelhouse, we provide Business Contract Hire deals on new cars from our franchised partners - Kia, MG, and Suzuki - in all sizes and classes to best provide choice for your specific company car needs. 

These include small city cars, such as the Suzuki Swift, or larger SUVs, like the MG ZS and the award-winning Kia Sportage.

Can I lease an Electric or Hybrid Car with Business Contract Hire at Chapelhouse?

Yes! We offer a range of electric and hybrid cars with a BCH to help you save even more money on fuel costs. 

Choose from the Kia electric range, such as the Soul EV, Niro EV, the high performance EV6 GT, or the stunning new Kia EV9. 

The multi-award winning MG4 EV is a good choice for those looking for a reliable electric hatchback for their business. The MG5 EV estate car and the MG ZS EV offer more space for those with the need to accommodate a greater load. 

And of course, the full Suzuki range comes as hybrid as standard, offering excellent fuel efficiency without compromising on performance.