19/01/2017
When considering how to manage a fleet of vehicles for your business, or even if you're a sole trader looking for a cost-effective way to drive a new car, understanding your financing options is paramount. Lex Autolease is a prominent name in the automotive leasing and contract hire sector, and a common question we encounter is whether they indeed offer Contract Hire. The short answer is a resounding yes. Lex Autolease specialises in providing flexible and comprehensive contract hire solutions for businesses of all sizes. This article aims to delve deeper into what Lex Autolease's Contract Hire entails, who it's best suited for, and the key considerations you should be aware of before embarking on this popular funding method.
What is Contract Hire?
Contract Hire, often abbreviated as CH, is a form of vehicle leasing agreement where a business (or sometimes an individual) hires a vehicle for a fixed period, typically between one and five years, for a fixed monthly payment. Unlike outright purchase or hire purchase, you don't own the vehicle at the end of the contract. Instead, you effectively rent the vehicle for its depreciating value over the agreed term. This makes it an attractive option for businesses looking to manage their vehicle acquisition and running costs more predictably. Lex Autolease structures these agreements to provide a hassle-free experience, often including maintenance, road tax, and breakdown cover within the monthly payment, simplifying fleet management considerably.
Who is Lex Autolease Contract Hire For?
Based on the information provided, Lex Autolease's Contract Hire is particularly well-suited for businesses that require company vehicles. This could range from a small startup needing a single van to a large corporation managing hundreds of cars for its sales force. The primary requirement for eligibility is that the business must have been trading for a minimum of two years. This criterion is common across the leasing industry as it provides lenders with a track record of financial stability. All agreements are, of course, subject to status, application, and necessary credit acceptance. This means Lex Autolease will assess your business's financial health and creditworthiness before approving an agreement. For sole traders or smaller businesses with a shorter trading history, alternative funding options might be more appropriate, but for established companies, Contract Hire with Lex Autolease can be a highly efficient way to manage vehicle fleets.
Key Considerations Before Signing Up
While Contract Hire with Lex Autolease offers numerous benefits, it's crucial to go into the agreement with your eyes wide open. Here are some of the essential factors you'll need to consider:
1. Contract Length and Mileage
The duration of your contract and the annual mileage you anticipate are the two most significant factors determining your monthly payments. Lex Autolease will offer a range of contract lengths, usually from 12 to 60 months. The longer the contract, the lower your monthly payments will typically be, as the depreciation is spread over a longer period. Similarly, your estimated annual mileage is critical. If you consistently exceed your agreed mileage, you will incur excess mileage charges at the end of the contract. Conversely, if you under-drive, you may be eligible for a rebate, though this is less common and depends on the specific terms. It is vital to accurately estimate your business's driving needs to avoid unexpected costs. Lex Autolease provides tools and guidance to help you make an informed decision here.
2. Initial Rental (Deposit)
Most Contract Hire agreements, including those from Lex Autolease, require an initial rental, often referred to as a deposit. This is typically a multiple of the monthly rental, such as three, six, or nine times the monthly payment. Paying a larger initial rental will reduce your subsequent monthly payments, making the overall cost of the contract potentially lower. However, it does mean a larger upfront cash outlay. You need to balance the desire for lower monthly payments against the immediate cash flow requirements of your business.
3. Maintenance Package
A significant advantage of Contract Hire is the option to include a maintenance package. This typically covers routine servicing, repairs, MOT tests, and sometimes even tyre replacements. Including maintenance provides greater cost certainty, as most of these running costs are predictable and covered within your fixed monthly payment. Lex Autolease often offers different levels of maintenance packages, allowing you to choose the level of cover that best suits your operational needs and budget. For businesses with a large fleet or vehicles that cover high mileage, a comprehensive maintenance package can be a real lifesaver, preventing unexpected garage bills and minimising vehicle downtime.
4. Insurance and Fuel
It's important to remember that Contract Hire agreements from Lex Autolease typically do not include insurance or fuel. You will be responsible for arranging and paying for your own commercial vehicle insurance, ensuring it meets the legal requirements for the vehicle and its use. Similarly, fuel costs will be borne by your business. Many businesses implement fuel cards or mileage reimbursement schemes to manage these costs effectively.
5. End of Contract Options
At the end of your Lex Autolease Contract Hire agreement, you have a few options:
- Return the Vehicle: This is the most common option. Provided the vehicle is in good condition and within the agreed mileage limits, you can simply return it to Lex Autolease, settle any excess mileage or damage charges, and walk away.
- Start a New Contract: You can then use the equity from your previous vehicle (if any) or simply start a new Contract Hire agreement on a brand-new vehicle. This is an excellent way to ensure your fleet is always up-to-date with the latest models and technology.
- Purchase the Vehicle: While not the primary intention of Contract Hire, in some instances, you may have the option to purchase the vehicle at the end of the contract for its residual value. This is usually determined at the beginning of the agreement.
6. Vehicle Condition and Damage
Lex Autolease, like all reputable leasing companies, will have guidelines on the acceptable condition of the vehicle at the end of the contract. This is known as the 'fair wear and tear' policy. Minor scuffs, scratches, or interior damage that are considered normal for the age and mileage of the vehicle will be acceptable. However, significant damage, such as large dents, cracked windscreens, or heavily stained upholstery, may incur charges. It is advisable to familiarise yourself with the BVRLA (British Vehicle Rental and Leasing Association) Fair Wear and Tear Guide, which Lex Autolease will likely adhere to, to avoid any surprises.
Lex Autolease Contract Hire vs. Other Finance Options
To further illustrate the benefits, let's compare Lex Autolease Contract Hire with other common business vehicle finance methods:
| Feature | Lex Autolease Contract Hire | Hire Purchase (HP) | Lease Purchase (LP) | Outright Purchase |
|---|---|---|---|---|
| Ownership | Renter (Lex Autolease owns) | Customer owns at end of term | Customer owns at end of term | Customer owns immediately |
| Monthly Payments | Lower (based on depreciation) | Higher (repaying capital + interest) | Lower than HP (balloon payment at end) | N/A (one-off payment) |
| End of Contract | Return vehicle, no ownership | Own vehicle outright | Option to purchase final payment | Own vehicle outright |
| Tax Benefits | Often tax-deductible as an operating expense (for VAT registered businesses) | Interest payments may be tax-deductible | Interest payments may be tax-deductible | Capital allowances may be claimed |
| Maintenance | Often optional inclusion | Customer responsibility | Customer responsibility | Customer responsibility |
| Best For | Businesses wanting predictable costs, regular fleet upgrades, and off-balance sheet funding. | Businesses wanting to own assets long-term and build equity. | Businesses wanting lower monthly payments and the option to own the vehicle. | Businesses with significant capital or those who need immediate ownership. |
Frequently Asked Questions
Q1: Can I get Contract Hire from Lex Autolease as a sole trader?
While the primary focus is on businesses trading for two years or more, Lex Autolease may have options for sole traders depending on their specific circumstances and credit assessment. It's best to contact them directly to discuss your individual situation.
Q2: What happens if I need to cancel my Contract Hire agreement early?
Early termination of a Contract Hire agreement typically incurs significant charges. These are usually calculated based on the remaining rentals and the vehicle's current market value. Lex Autolease will have specific terms and conditions regarding early termination, which you should review carefully.
Q3: Is VAT reclaimable on Lex Autolease Contract Hire?
For VAT-registered businesses, a portion of the VAT on the monthly rental payments for cars can typically be reclaimed. For commercial vehicles like vans, the VAT on the full monthly rental is usually reclaimable. Lex Autolease can provide detailed guidance on VAT implications.
Q4: Can I choose any make and model of vehicle?
Yes, Lex Autolease offers a wide range of vehicles from various manufacturers. You can typically specify your desired make, model, and even optional extras, allowing you to tailor the vehicle to your business's specific needs.
Q5: What is the benefit of Contract Hire over buying a company car outright?
Contract Hire offers several advantages over outright purchase, including lower initial outlay, predictable monthly costs, the ability to upgrade to new vehicles more frequently, and often the benefit of inclusive maintenance, which reduces administrative burden and unexpected expenses. It also keeps vehicles off your balance sheet, which can be advantageous for financial reporting.
In conclusion, Lex Autolease absolutely offers Contract Hire, and it is a robust and popular funding solution for businesses looking to manage their vehicle requirements efficiently and cost-effectively. By understanding the terms, considering your business's specific needs regarding mileage and contract length, and opting for relevant packages like maintenance, you can leverage Lex Autolease's Contract Hire to benefit from a modern, well-maintained fleet without the complexities of outright ownership.
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