Equipment Contract Hire provides all the benefits of having new equipment over an agreed period of time and mileage. This gives you cost-effective access to new equipment and none of those large drops in value normally associated with owning a new machine outright. You also have peace of mind that service maintenance, warranty issues and repairs are part of the hire cost.
You could find this cheaper than a finance lease. If, for example, you wanted to buy an excavator for £100,000, a finance lease would be structured to pay off the whole amount plus interest over a period of, say, five years. However, under contract hire, the contract is based on length of hire and therefore any shortfall in finance and residual value is down to us.
One of the big benefits of contract hire to a small business is that there is no large capital outlay for equipment that could damage the company’s balance sheet. While your business needs certain equipment, through a contract hire agreement only the rental charges will be shown on the balance sheet which should make it more attractive.
In summary, you can budget predictably for all your equipment costs which is fixed for the length of the contract. The other benefits are there are no large deposits and upfront VAT payments to find. When your contract hire agreement ends there are two options available to you. These are:
Return the equipment and hire a new machine.
Take an extension on the agreement which in some agreements can be slightly cheaper.