A contract hire is a legal agreement between two parties where one party agrees to provide a specific item or service to the other party for a predetermined period of time in exchange for payment. The party providing the item or service is referred to as the “hirer” and the party receiving the item or service is referred to as the “hirer.” The terms and conditions of the contract hire, including the duration of the agreement, the payment terms, and any additional obligations or responsibilities, are typically outlined in a written contract. Both parties are legally bound to fulfil their respective obligations as stated in the contract.
Contract hire is a type of vehicle leasing agreement where a company or individual can hire a vehicle for a fixed period of time, typically between 2 to 5 years, by paying fixed monthly rentals.
Contract hire is suitable for both individuals and businesses. It is commonly used by businesses for their company vehicles, but individuals can also benefit from the convenience and flexibility of contract hire.
Some advantages of contract hire include lower upfront costs compared to purchasing a vehicle, fixed monthly payments, no depreciation worries, and the ability to upgrade to a new vehicle at the end of the contract.
Generally, modifications to the vehicle are not allowed during the contract hire period without the lessor’s permission. Any modifications made without permission may result in penalties or additional charges.
If you exceed the agreed mileage limit stated in the contract, you may be subject to excess mileage charges. These charges are typically calculated based on the number of additional miles driven over the agreed limit.
Terminating a contract hire agreement early may incur early termination fees. These fees can vary depending on the terms of the agreement and the remaining duration of the contract.
In some cases, contract hire agreements can be transferred to another individual or business. However, this is subject to the lessor’s approval and may involve administrative fees.
At the end of the contract hire period, you can return the vehicle to the lessor, extend the contract, or choose to purchase the vehicle at a predetermined price. The options available may vary depending on the terms of the agreement.
In certain jurisdictions, businesses may be able to claim tax benefits on contract hire agreements. It is advisable to consult with a tax professional to understand the specific tax implications in your jurisdiction.
This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.
This glossary post was last updated: 5th April 2024.
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