Contract Hire

Very simple. You effectively rent the vehicle for a fixed period of time based on an agreed mileage. If you go over mileage then there is a pence per mile excess charge, on average around 6 pence per mile. E.g. 1000 miles over mileage costs £60.

 

Typically a contract runs for three years, as it matches most manufacturer warranties, but you can contract hire over 2, 3, 4 or 5 years. Basically the longer the term then the lower the monthly rental.

 

At the end of the contract you hand the keys back and return the vehicle, subject to it being in a reasonable condition for the age and mileage. There is an industry guide that governs all leasing companies called the BVRLA ‘Fair Wear and Tear Guide’.

 

You can add a service and maintenance package if required but unless you are doing 20,000 miles a year then we wouldn’t generally recommend it. The largest cost in a maintenance budget is tyres so unless you are doing some serious mileage there is little point ‘insuring’ your tyres for replacement.

 

Contract hire is all based around residual values. E.g. A van costs £20,000 and, with 30,000 miles on it, is worth £5000 in three years. You effectively pay the depreciation of £15,000 plus the cost of borrowing the money. Therefore, the higher the value at the end then the less depreciation there is to pay and the less the monthly payments are.

 

A good example of this in practice is the Vauxhall Vivaro Sportive. The Sportive v an is actually cheaper on contract hire than the standard van as the Sportive is worth so much more at the end of the contract because of all the extra options it has on it like Air-conditioning and Bluetooth.

 

For the same reasons vans like Mercedes and Volkswagen are particularly good on a lease. The first reason is very simple. They hold their value and are in demand as used vehicles. The second reason is a bit more complicated. Vehicle manufacturers like Mercedes and Volkswagen are a bit obsessive about their brand and protecting the residual values of their vehicles. They don’t supply huge numbers of vans and they carefully control their pricing. Therefore never buy a Volkswagen Transporter for cash or on Hire Purchase. The discount will be next to nothing as VW don’t want the market to know what they are discounting the vehicle by. However, lease or contract hire a Transporter and it is not much more than a new Transit Custom, if you know where to look. And obviously we do!





White Hot Vans is a trading style of The White Hot Van Company Ltd.
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