What Is Contract Hire? A Plain-English Guide

Contract hire is the most common way businesses and individuals lease a van in the UK. You pay a fixed monthly rental for an agreed period - typically 24, 36, or 48 months - and an agreed annual mileage, and you hand the van back at the end. You never own it, and you're not trying to: contract hire is built for people who want a predictable monthly cost and a new van every few years, not an asset on the balance sheet.

What's included in the monthly price

The rental itself covers the cost of the van depreciating over the contract, plus interest. Road tax is usually included. Maintenance can be added as an optional extra for a higher monthly fee, which covers servicing, MOTs, and routine repairs - useful if you want one predictable number rather than surprise workshop bills. Insurance is not included and needs arranging separately.

Mileage matters more than people expect

Your monthly price is calculated against an annual mileage allowance you agree upfront. Go over it and you'll pay an excess mileage charge at the end of the contract, usually a set rate per mile. It's worth being honest about how the van will actually be used rather than picking a low mileage figure to get a cheaper quote - the excess charges can add up faster than the saving.

Who contract hire suits

• Businesses that want vans off the balance sheet and a fixed, known cost
• VAT-registered businesses, who can usually reclaim 50% of the VAT on the rental (100% if the van is used exclusively for business)
• Anyone who wants a new van every few years without the hassle of selling the old one

If you want to own the van outright at the end, or you're not sure how many miles you'll actually cover, it's worth comparing against finance lease or hire purchase - see our guide on the differences between them.