If you are looking to own a vehicle at the end of the contract then this is not the contract for you. Contract Hire is a lease agreement where you hand the car back at the end of the term. Business Contract Hire is a tax efficient funding method where you do not own the vehicle but hire it for a fixed term. You, the hirer of the vehicle, chose an annual mileage for the contract period, pay fixed monthly rentals for the duration of the contract. Then you hand the car back with no disposal problems.

A maintenance option is usually available with Contract Hire agreements. This normally is included in your total monthly payment if you should choose to take the vehicle maintenance package. So it does mean that Contract Hire with maintenance is perfect if you want to work within a fixed monthly budget.

There is Vat benefits associated with a vehicle maintenance contract. As a service the vehicle maintenance attracts Vat which is normally fully refundable to a Vat registered business.

When it comes to accounting, this type of business lease delivers 'off balance sheet' accounting and reclaimable VAT. By taking out a contract hire agreement your business may well find that as a funding method Contract Hire can free up your cash flow and help in the smooth running of your fleet

Ownership of the vehicle is always retained by the leasing company and there is not an option to purchase as under a lease agreement the rules preclude a company from ever owning the vehicle once it has been leased.

Any unforeseen disposal problems such as a sudden crash in the resale value of vehicles are the sole responsibility of the leasing company so you don't have to worry. All you have to do is return the vehicle in a fair condition and plan your next vehicle. Thus avoiding the disposal problems that are attached to owned vehicles at the end of the finance period. If you don't fancy taking on the role of car salesperson then this contract could be the one for you.

If you are a private individual you can take out a Personal Contract Hire agreement. Personal Contract Hire as the name suggests works the same way as Contract Hire but for private individuals.

Because the costs are fixed it allows you to work within a fixed budget. Lik e Business Contract Hire the user allocates their chosen mileage and then at the end of the contract period hands the car back.A full service and maintenance package can be arranged for you.

Non of the Vat benefits apply to private individuals running a Personal Contract Hire vehicle but all of the other benefits associated with fixed cost motoring and hassle free vehicle disposal still apply.

Personal Contract Hire can be a great way to renew your vehicle at regular intervals. The normal change cycle can be from as little as twelve months up to a usual forty-eight months.

Finance Lease is not a contract associated with the ownership of a vehicle. At the end of the contract the vehicle must be sold by the user. As with a Con tract Hire agreement, the vehicle hirer has enjoyed tax benefits associated with the vehicle so the vehicle must be disposed of as Finance Lease is just that, a lease agreement.

At the start of the contract a realistic valuation is suggested as a final rental to be paid after the contract term. The user normally pays around 5% of the vehicle sale proceeds back to the leasing company which terminates the vehicle contract.

If an unrealistic mileage has been set at the start of the contract, or the vehicle has damaged or abused then the user will lose out as the resale value of the vehicle could be significantly less than the final rental due to the leasing company. Should there be a drop in resale values of vehicles then the risk is with the user not the leasing company.

Unlike Contract Hire the vehicle is shown on the company balance sheet and the VAT is reclaimable. The monthly rental is determined by the annual contract mileage, cost of the vehicle and the chosen period of hire.

You do benefit through fixed rental costs and optional maintenance packages but the user also takes on the administration and operating risks for the vehicle.

This can be a great method for raising capital. The capital that can be tied up in a fleet of vehicles can be considerable. If you choose to release the capital tied up in vehicles you already own outright then you can in effect sell them to the leasing compan y and they will lease them back to you at a fixed monthly hire cost. The title to the vehicles is transferred to the leasing companies upon their sale.

Contract Hire is commonly used for the method of leaseback which can be tax efficient. A Sale and Leaseback agreement can enable a company to use the cash raised somewhere more useful within their business.

If your company needs to raise capital or wishes to switch to a more tax efficient method of funding then this could well be a funding solution for you.

Personal Contract Purchase is also referred to as PCP. Personal Contract Purchase allows a person to lease a vehicle while retaining an option to purchase at the end of the contract or hand the vehicle back.

PCP has fixed monthly costs with an initial rental of the equivalent of between three and six rentals. The larger the initial payment the lower the monthly payment will be. Conversely, the lower the initial payment made, the higher the monthly payment will be.

So the way it works is; an initial rental followed by fixed monthly rentals over a set period of between one and four years, and then a final optional payment. This payment can be made if you choose to keep the vehicle, but if not then you have the choice of handing the car back with nothing else to pay.

If you are a company car driver looking to opt out of a company car scheme to avoid Benefit In Kind taxation then this could be the finance package for you. This type of agreement allows some freedom from some company car schemes that can prove to be very rigid when it comes to the choice of company vehicle.

Alternatively, If you are a private individual looking for a personal finance agreement with an option to own the vehicle at the end of the contract then this could be the choice for you.