What is Contract Hire?

By Jasmine Baker
What is Contract Hire?

What is Contract Hire?

Are you looking for a new vehicle for your business and don’t know where to start? You may have heard people talking about leasing and contract hire, and you might be just a little bit confused, but there is nothing to be confused about as here at MWVC we are experts in contract hire with over 100 years experience in the motor world between us.

Contract Hire doesn’t have to be scary, and we have some really great information for you to put your mind at rest. You can watch a short video about it or even download our more comprehensive PDF booklet, or just simply read on and have all your questions answered. 

Contract Hire is simply another way of saying you are leasing, or renting, a vehicle. It is usually over a long term of 2 to 5 years, and it is often seen as the cheapest way of ensuring that you have a brand-new vehicle without having to pay out the full cost. Let me explain; with Contract Hire you only pay for what you say you will use of the vehicle, this is worked out by the length of the contract that you want and the mileage that you expect to use. The vehicle's depreciation value is already taken into account and reflected in your monthly pricing. 

How Easy Is Contract Hire?

Let me walk you through the process and you can see just how easy it is. Browse our site and pick the vehicle that best suits you, your needs and your budget, you can fill in the contact form or call us, and we will go through some very simple basic questions with you, such as your estimated mileage and length of term. This helps us to put together the right quote for you. The quote that we send you will have the initial rental payment, term, annual mileage and excess mileage for you to review and if you are happy with it then we can move forward.

Initial Payment And Monthly Rental

The Initial payment is the first payment that you will make, and it is taken after delivery. This is an agreed amount between both parties, and it is usually 3 or 9 times your monthly rental price. The monthly rental price is the price that you pay each month for the length of your contract and is taken by direct debit. There is some flexibility with your initial payment, and you can choose to pay a larger initial payment and smaller monthly payments for the duration of the contract, or you can pay a smaller initial deposit and higher monthly payments, it is really whatever suits your budget best, the overall amount paid is the same. The ‘Term’ is the length of the contract that you choose, so if you choose a 3-year contract, your monthly payments will continue for 36 months.


The Mileage that you choose is up to you. The price will vary depending on the miles you pick, so it’s important to consider carefully how many miles you will need to use each year. If you use more miles, then you will be charged an excess, this is usually charged at 7p to 15p per mile and will be clearly shown in your quote and then your contract. You are charged for excess miles only if you go over your total mileage at the end of the term, as you are getting more use out of the vehicle than has been calculated for when your contract was created and the deficit needs to be made up. This is explained in our PDF booklet.

“Let's say you decide to set up a 3-year agreement where you expect to travel on average 10,000 miles per year. This is how your monthly rentals will be calculated. The difference between the new vehicle cost and how much the same vehicle will be worth in 3 years time after doing 30,000 miles. So that's how much usage of the vehicle you're paying for. Now if you end up travelling 50000 miles over that same 3-year period the residual value of the vehicle is now much lower and that difference hasn't been allowed for by a higher monthly rental. In other words, you've had more use out of the vehicle than you have paid for. The 20,000-mile difference is the excess mileage, and the excess mileage charge is the finance company's way of recovering the loss on the residual value.”

Your Quote

Here at MWVC, we will send your lease quote with two options available to you. One with Maintenance and one without Maintenance. If you choose to add maintenance, then obviously this will change the price, and it will include services to your vehicle for the duration of the contract lease, it will cover “servicing,” minor repairs and replacements of some parts such as tyres and brakes.

Maintenance is a cost that is hard to predict, and if you choose to not add the package, then all additional costs and services will have to be covered by you. Choosing our maintenance package can ensure that you won’t have to worry about servicing, tyres or repairs and may work out more budget friendly in the long run.

The End Of Your Contract Hire

In the last six months of your contract, we will be in touch with you to discuss your options in moving forward. One is to simply swap your vehicle. You select a brand-new vehicle and start up the whole contract hire again with your set mileage and initial payments and maintenance options. It's a really simple way to ensure that you are always driving a new vehicle and never have to fork out the full price, if your vehicle is used exclusively for business then you may be able to claim some tax back. Choosing this option, you may be able to reduce your monthly payments depending on which vehicle that you choose to lease next.

Alternatively, you may prefer to keep your current vehicle for a little bit longer. If this is the option that you prefer, then we can discuss further options to you. You may be wanting to keep your current vehicle for a short time, like 6 months or even just another year, this can be done with a contract extension, or there is an option for a month by month renewal, but this is an informal arrangement and there is no guarantee that you will be able to keep the vehicle for the length of time that you require. We are more than happy to talk you through all your options and help you get the best deal possible to ensure that there is no disruption to you and your business.


So, there you have it. Step by step, a walk through of Contract Hire. It really is simple, everything is explained along the way, and you get to choose which option is best for you. We have a dedicated team with years of experience waiting to help you, so, if at any point of the process you have questions, just call us or email us, and we will do our best to support you. We have dedicated pages on our website where you can find out information about contract hire and other forms of finance, so please feel free to look around our site as the answers might be just a click away. Hopefully this article has answered all or any questions that you might have had, and you now know all about Contract Hire, and you're ready to lease your new vehicle from us here at MWVC today.