Contract hire

A contract hire finance solution arranged by Luna Finance allows you to pay each month for the full use of an asset. Instead of paying off the full value of the asset, you are only required to pay the depreciation value.

What is contract hire?

A contract hire agreement requires you to only pay back the assets depreciation value. This means that the amount you will pay every month directly relates to how much the asset will decline in value.

Unlike some other finance options, with this lease type you won’t own the asset at any point. Instead, ownership remains with the leasing company. This means that you can avoid some of the burdens that often come with owning a high-value vehicle or other asset type.

for alex

Unsure on repayments? Try our Asset Finance Calculator

The depreciation of the asset is agreed at the beginning of the contract. This takes into account how the asset will be used and the period of time it will be hired for. For example, the estimated mileage and the number of journeys made will contribute to a contract hire agreement on a vehicle. Amendments can usually be made during agreements to accommodate for changing circumstances.

How it can work for your business

Contract hire is a popular finance option for businesses who run a fleet of vehicles but don’t want the costs of ownership or maintenance. To get the best lease prices possible, contract hire agreements work best on vehicles that hold their value well.

At the end of the agreement, you hand back the asset to the lender. Additional charges can incur if you don’t meet the conditions of the contract, such as exceeding vehicle mileage limits. You can then choose if you’d like to take out a second finance agreement to replace the asset.

Benefits of contract hire:

  • Full use of a high-value asset – Remove the burden of ownership
  • Improve cash-flow – Spread the costs over time
  • Stay ahead – Swap asset for a new version when the contract ends
  • Additional services – Sometimes include add-on packages such as maintenance services
  • No administration – This is handled by the leasing company as legal owners of the asset