What is business contract hire (BCH) and what are the pros and cons?

Fleet car managers often use business contract hire to finance company cars, but is it right for your fleet? Here's everything you need to know about BCH.....

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Business contract hire is used by many companies with company car fleets because it lets them provide their employees with new vehicles and claim back some VAT.

BCH runs in the same way as personal contract hire (PCH), so your company will hire the car for a fixed period and mileage, but as the name suggests, it’s for business only (not private individuals).

However, as with every form of finance, there are positives and negatives, so it pays to make sure the package will work for your specific needs.

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First, the good news. A BCH package can be completely hassle free, because if you’re willing to pay an additional monthly fee, you can add a maintenance package. This means that virtually every hassle you can expect to encounter (and some you might not expect) will be covered during the contract.

Better still, if the vehicle is used solely for business use, your company can claim back a significant portion of the VAT on the package.

And that’s not the only way you’ll reduce business costs, because the monthly payments are often less than you’d be shelling out to buy a car.

Also, you’ll have access to the latest, most efficient company cars so your fuel costs will come down. You might also find that your business cars are exempt from the ultra-low-emissions zones that are springing up around the country.

Read more: Should I take a company car or the car allowance?

However, business contract hire isn’t for everyone. For a start, you’ll need to have an accurate idea of how many miles your employees cover each year, because BCH contracts contain a mileage limit, and the penalties for exceeding these can be steep.

Obviously, the car must be properly insured (see our fleet car insurance guide) and maintained throughout the contract. You are allowed standard wear and tear are allowed, but anything beyond that will cost money. To that end, we’d advise you to check the fair wear and tear guide before you sign the agreement.

And if you think your company might like to hang on to the vehicle at the end of the agreement, then perhaps BCH is not for you, because it won’t offer you the ability to purchase the vehicle.

So, there are good points and bad points, depending on what you need from your BCH contract. Such an agreement tends to work best for companies that want to operate a fleet of cars (as long as they know each employee’s mileage needs).

BCH agreements tend to last from 12 to 48 months, which allows the company to respond to changes in employee requirements quicker than alternative methods.

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