Business contract hire explained
Updated September 2026 · 8 min read
Business contract hire is a fixed-term vehicle lease for a business. You pay an initial rental, then fixed monthly rentals, to use a van for an agreed term and mileage. You hand it back and never own it.
What is business contract hire?
Business contract hire (BCH) is the commercial version of leasing. FleetMe buys the vehicle, owns it throughout, and hires it to your business for a term and an annual mileage you agree upfront. Your business is the hirer; the vehicle stays on our books. At the end of the term it comes back to us, and we carry the risk of what it is then worth. That single point — we take the residual value risk, not you — is why contract hire dominates UK business fleets. You are buying the use of a van for a known number of months at a known monthly cost, not an asset you later have to sell. There is nothing to advertise, no part-exchange to argue over, and no depreciation sitting in your accounts as an educated guess.
How is a business contract hire quote built?
Four inputs set the rental: the vehicle and its specification, the term (typically 24, 36 or 48 months), the annual mileage, and the initial rental. The initial rental is quoted as a profile such as 6+35 or 9+35 — six or nine months' rental paid at the start, followed by 35 equal monthly rentals. A larger initial rental lowers the monthly figure but ties up more cash on day one; a 1+35 or 3+35 profile protects working capital and costs a little more each month. Business rentals are quoted excluding VAT, because that is how a VAT-registered business budgets. VAT is added at the standard rate to each rental and, for a van, is normally reclaimable in full — see our VAT on van leasing guide. Every FleetMe quote is confirmed in writing before you commit.
What is included in the rental, and what is not?
Included as standard: the vehicle, delivery, the manufacturer's warranty for its duration, and vehicle excise duty for the whole contract. Optional, and priced separately so you can see it: a maintenance package covering servicing, tyres, MOT and mechanical wear items — see maintenance packages explained. Never included: insurance, fuel or charging, AdBlue, accident damage, tolls, congestion and clean-air charges, and anything you fit yourself such as racking or livery. Two things businesses often assume are covered but are not: punctures caused by road debris are usually chargeable outside a maintenance package, and damage beyond fair wear and tear at the end of the term is always chargeable. Knowing where the line sits before you sign is the difference between a predictable cost and an unwelcome invoice.
Which businesses does contract hire suit?
It suits any business that needs vehicles to earn money rather than to hold value. Specifically: VAT-registered businesses running vans, because the VAT on a commercial vehicle lease is normally 100% reclaimable; businesses that want a fixed, forecastable cost per vehicle per month; businesses without the cash or the appetite to sink £30,000 into a depreciating asset; and businesses that would rather not run a disposal process every three years. It suits high-mileage operations less well unless the mileage is declared honestly upfront — see van lease mileage explained. And it is a poor fit if you genuinely want to own and keep vehicles for eight or ten years, in which case outright purchase or a finance lease deserves a proper look.
What happens at the end of a business contract hire agreement?
We contact you ahead of the end date to arrange collection. The vehicle is inspected against the BVRLA Fair Wear and Tear standard, which has a separate guide for light commercial vehicles recognising that vans do real work. Mileage is recorded, and anything over your contracted total is charged at the pence-per-mile excess rate written into your agreement at the start. Damage beyond fair wear and tear is charged; normal working wear is not. If you have run signwriting or racking, it must be removed and the vehicle made good — our end-of-lease damage standards guide covers exactly how to prepare. You can order a replacement to arrive as the outgoing vehicle leaves, so the driver is never off the road and the round never misses a day.
How does contract hire affect your tax and VAT position?
Two mechanisms matter. VAT: a VAT-registered business can normally reclaim 100% of the VAT on a van lease rental; for a car, 50% of the VAT on the rental is blocked because HMRC assumes some private use (HMRC, VAT Notice 700/64, sections 3.5–3.7 and 4.2, 2026). Corporation tax or income tax: lease rentals are a revenue expense, so they reduce taxable profit as you pay them — with one restriction. Where a car emits more than 50g/km CO2, 15% of the rental is disallowed (HMRC Business Income Manual BIM47714; the 50g/km threshold applies for periods from 1 April 2021 for corporation tax and 6 April 2021 for income tax). Vans are not subject to that restriction at all. The detail is in is van leasing tax deductible?
What changes in 2026: leases move onto the balance sheet
If your business reports under FRS 102, the accounting treatment changes. For accounting periods beginning on or after 1 January 2026, amendments issued by the Financial Reporting Council remove the old operating-lease and finance-lease split for lessees: most leases are recognised on the balance sheet as a right-of-use asset with a matching lease liability, and depreciation plus a finance charge replaces the single rental expense in the profit and loss account. Leases of 12 months or less and genuinely low-value assets are exempt, and a vehicle will not qualify as low value. The points to raise with your accountant are the effect on gearing and on any bank covenant keyed to balance-sheet liabilities, and the fact that EBITDA generally improves because rentals become depreciation and interest. It changes how contract hire is presented; it does not change the cash you pay.
How FleetMe handles a business contract hire enquiry
Tell us the job rather than the model if you are not sure: payload, load length, mileage, how many vehicles and when you need them. We quote in writing with the term, mileage, initial rental, monthly rental and any maintenance element itemised separately, ex-VAT with the inc-VAT figure alongside. Underwriting looks at the business, the directors and affordability. New limited companies with no trading history are genuinely considered — commercial underwriting does not stop at filed accounts, and a director's guarantee is often part of the answer. Adverse credit is looked at case by case. We will tell you honestly and quickly if we cannot help, because a slow no is worse for you than a fast one. Get a written quote, or browse our van range.
Put a price on it
Tell us the vehicle, the term and the annual mileage you need and we come back with a written quote, and we aim to do that the same working day. Rentals are quoted ex VAT with the VAT-inclusive figure alongside, and your agreement is with FleetMe.
Thanks — your enquiry is in.
We’ll go through what you need and come back with a written quote, we aim to do that the same working day. Your agreement would be with FleetMe — we supply the vehicle, and we confirm it in writing before anything is agreed.
What happens next
- 1 We read what you sent us. We check the vehicle, the length and the mileage you asked for, and work out what we can do at that specification.
- 2 We come back with a written quote. We aim to send it the same working day. It sets out the vehicle, how long you have it, the mileage, the initial rental and the monthly figure — ex VAT with the VAT-inclusive figure alongside.
- 3 You decide. Nothing is committed until you have that in writing and you are happy to go ahead. If we can’t help, we’ll tell you honestly and say why.
Nothing is committed at this stage, and if we can’t help we’ll tell you honestly rather than leave you waiting.
Browse vans →FAQs
Do you own the vehicle at the end of business contract hire?
No. Contract hire is a hire agreement, so the vehicle comes back to FleetMe at the end of the term. There is no purchase option and no final balloon payment. If ownership matters to your business, a finance lease, contract purchase or outright purchase is the route to look at instead.
Is road tax included in business contract hire?
Yes. Vehicle excise duty is included for the full length of the agreement, along with the manufacturer warranty. Insurance, fuel or charging, AdBlue, tolls and clean-air charges are not included, and servicing is only included if you take a maintenance package.
What does 6+35 mean on a lease quote?
It describes the payment profile: an initial rental equal to six monthly rentals, then 35 further monthly rentals, so 36 rentals in total across a three-year term. A 9+35 profile means more upfront and a lower monthly figure; 1+35 keeps more cash in the business.
Can a new limited company get business contract hire?
Often yes. Commercial underwriting weighs the business, its directors and affordability rather than looking only for years of filed accounts, and a director’s guarantee is commonly part of the arrangement. We will give you an honest answer quickly rather than leaving you waiting.
Can you end a business contract hire agreement early?
Usually yes, by agreement and for a termination charge, because you are ending a fixed-term contract. Ask us for the settlement figure in writing before you decide. Never simply stop paying — talk to us early and there is almost always a better route.
Is business contract hire cheaper than buying a van?
It is usually cheaper on cash flow and more predictable on cost, because you pay for use rather than the whole asset and carry no resale risk. Whether it is cheaper overall depends on how long you keep vehicles, your tax position and what capital allowances you could claim. Model both with your accountant.
Next step
Business van leasing →
How the monthly rental is built, what is included, and who business contract hire is for.
Van leasing for a new limited company →
The honest answer on who gets considered, and what we look at when we assess a business.
Or go straight to the range: browse vans and pickups · company cars