Contract Hire for Van Fleets
Contract hire fixes your monthly cost for the term. You pay a pre-agreed rental, use the van, and return it at the end. The lender takes all residual value risk - if used van values fall during your contract, that is the lender's problem, not yours. Maintenance packages can be bundled in, making it a truly fixed-cost solution. There is no large capital outlay and no vehicle disposal to manage.
Finance Lease for Van Fleets
Under a finance lease, you make lower monthly rentals because you retain an interest in the vehicle's residual value. When the lease ends, the vehicle is sold; the lender takes a small percentage of the proceeds (typically 2–5%) and passes the rest to you as a secondary rental credit. If used van prices are high at the end of the lease, you benefit. If they are low, you absorb the shortfall.
Cost Comparison - Indicative (Ford Transit Custom, 4 years)
| Factor | Contract Hire | Finance Lease |
|---|---|---|
| Monthly rental | £450–£550 (incl. maintenance) | £330–£400 |
| Residual value risk | Lender | Lessee (you) |
| End of term | Return van | Van sold; proceeds returned (less small %) |
| Balance sheet (FRS102) | Off (operating lease) | On (finance lease) |
| VAT recovery (CV) | 100% | 100% |
| Tax treatment | Rental as expense | Rental as expense |
| Mileage restriction | Yes (excess charged) | No (more flexible) |
Mileage and Flexibility
Contract hire agreements include a contracted annual mileage. Exceeding it triggers an excess mileage charge (typically 5–15p per mile). Finance leases have no mileage restriction because you share in the residual value. For high-mileage fleets (15,000+ miles per van per year), finance lease often works out cheaper overall.
Which is Right for Your Fleet?
Contract hire suits fleets that value cost certainty, want maintenance included, operate within predictable mileage and prefer to avoid vehicle disposal. Finance lease suits fleets with variable or high mileage, those that want lower monthly payments and are comfortable managing vehicle sale at the end of the term.