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Contract Hire has predominantly been available to the VAT registered business customer but it can offer you some advantages over other funding methods depending on your personal circumstances. It is essential that you fully understand exactly what Contract Hire can do for you and what your responsibilities are under the terms and conditions.
Definition Contract Hire is a "simple rental agreement" where you hire a vehicle for a fixed term at an agreed contract mileage and simply return the car at the end of the period (subject to vehicle condition). You can never own the vehicle as that remains with the finance provider.
Service & Maintenance The vehicle must be serviced at the manufacturer's recommended intervals by an authorised dealer and you are responsible for any damage other than that incurred through reasonable, fair wear & tear.
End of Contract At the end of the Contract Hire agreement you simply return the car, subject to mileage and the condition of the vehicle being in "good repair and condition", taking into account "fair, wear & tear". If you have exceeded the contract mileage you are liable to pay excess mileage charges for mileage covered over the agreed contract mileage, and if the vehicle is not deemed to be in the appropriate condition you will be charged to bring it to that standard. The finance provider will write to you 6 months before the end of contract date to remind you of the process.
Early settlement You can decide to end the Contract Hire agreement early, however in this case, you will be liable to pay all the outstanding rentals, less a small rebate.
Summary Contract Hire takes away the potential costs of ownership but does require you to return the vehicle in "good repair and condition" at the end. Reconditioning costs could be substantial if you have failed to look after the vehicle whilst in your possession. You cannot own the vehicle at the end of the contract period, and early settlement is relatively expensive.
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