The 30-van engineering fleet that ran the numbers — and stayed on flexi hire.

The company in this case is a field engineering business. Thirty engineers, each with a van. The business is profitable and growing — not a start-up watching every penny of cash, but an established operation with a proper accounts function, a banking relationship, and real commercial ambition.

Staff turnover exists but is not high. The business wins new contracts and loses old ones. Workload moves with the seasons. Engineers occasionally leave and are not always replaced straight away. The fleet requirement is real and ongoing — but it is not fixed with the precision that a financial commitment of this scale would need to justify.

The business moved off a national hire chain some years ago. The national was inflexible. Processes were rigid, account management was weak, and any deviation from standard terms met the same answer regardless of the commercial relationship: it was their way or nothing. They moved to an independent operator on flexi hire. The vehicles stayed. The relationship improved. The fleet has now been running on rolling 28-day terms for over two years — the same engineers, often in the same vehicles.

The question that surfaces periodically — usually when someone in finance reviews the monthly hire cost — is whether there is a cheaper structure available. On paper, there is. This is what happens when you look past the paper.

It is worth being precise about contract hire pricing, because the headline numbers are misleading. Advertised business contract hire deals for a medium van like a Transit Custom currently start around £300–£320 per month excluding VAT on a 36-month term. Those are the rates that make contract hire look dramatically cheaper than flexi hire — but they are finance-only, lead-in deals built on a low annual mileage allowance, typically 8,000–10,000 miles, with no maintenance included.

This fleet runs 30,000 miles per vehicle per year and cannot operate without maintenance cover. Both factors push the real rate up. A higher mileage band raises the monthly figure because it erodes the vehicle's residual value, and a maintenance package — covering servicing, tyres and wearables — adds further cost on top. Built to this fleet's actual usage, a realistic all-in 36-month contract hire rate sits closer to £430–£500 per month per vehicle, not the sub-£320 headline.

The same vehicle on flexi hire — with a 30,000-mile allowance and servicing, maintenance and breakdown cover included as standard, plus the flexibility premium — sits around £600–£700 per month with a well-rated independent operator.

So the genuine, like-for-like saving is closer to £150–£250 per vehicle per month, not the £280-plus a comparison against the advertised lead-in rate would suggest. Across 30 vehicles, that is £54,000–£90,000 per year. Still a number worth examining — but already smaller than the headline implies, and that is before any costs are added back.

Two things matter before reading the figures below. First, a 30,000-mile contract hire rate already has that mileage priced in, so this is a genuine like-for-like comparison — not a low-mileage rate that excess charges would later inflate. Second, the comparison only holds while the business stays at its contracted mileage. The moment real usage runs above the agreed figure, excess mileage charges of typically 5–15p per mile apply at the end of the term, and on a working fleet at this mileage that is a live risk, not a remote one.

Here is what contract hire requires that flexi hire does not.

Fleet management overhead. Thirty contract hire vehicles at 30,000 miles per year need active management — MOT scheduling, service intervals, tyre monitoring, fair wear and tear documentation before handback, compliance oversight, and day-to-day administration. None of it runs itself. For a fleet this size, the business needs at least one person whose core role is fleet coordination. The average UK fleet manager salary sits around £38,000–£43,000 a year; with employer National Insurance and pension, the total employment cost lands at roughly £47,000–£52,000 annually. None of that exists under flexi hire — the independent operator carries it inside the rate.

Tyres and servicing. At 30,000 miles a year, a commercial van typically needs a full set of tyres every 18–24 months and a full plus interim service annually. A maintenance-inclusive contract hire rate covers these; a finance-only rate does not. If the fleet is on the cheaper non-maintained rate, tyres run £320–£450 per set fitted (£4,800–£7,500 a year across 30 vehicles) and servicing £350–£500 per vehicle per year (£10,500–£15,000 across the fleet).

Fair wear and tear at handback. A real and rising cost businesses consistently underestimate. Sector data shows the average fair wear and tear charge on returned vans has climbed to around £597, with 58% of vans now hit by these charges — both record highs. Across 30 vehicles over a 36-month term, that is a provisioned liability in the region of £10,000, payable in cash when vehicles go back.

The net saving, rebuilt honestly. The saving and the add-backs move together depending on which rate the business takes. On a maintenance-inclusive rate (the realistic £430–£500), servicing and tyres are already in the monthly figure — so the saving versus flexi hire is smaller to begin with (£150–£250 per vehicle), but you don't add those costs back. On a cheaper non-maintained rate, the headline saving looks larger but tyres, servicing and management land on the business separately. Either way, the destination is similar:

The realistic mid-point — a properly maintained contract at honest mileage, with one fleet coordinator and normal end-of-term charges — lands at a modest net saving of perhaps £10,000–£20,000 a year on a 30-vehicle fleet generating substantial revenue. And that is before the balance sheet, the P&L, the flexibility, and the purchase comparison are taken into account — each of which moves the decision further from contract hire, not towards it.

This is the part most comparisons skip, and for a limited company it is decisive.

Flexi hire — the clean position. On rolling 28-day terms, flexi hire qualifies for the short-term lease exemption: leases of 12 months or less are not capitalised. The treatment is simple. Each monthly invoice is an operating expense in the profit and loss account, period by period. Nothing appears on the balance sheet — no asset, no liability. VAT on each invoice is reclaimed on the next quarterly return. The business's gearing, net debt and borrowing headroom are completely unaffected. In cash and accounting terms, what you pay is what you expense.

Contract hire — heavier than it used to be. This is where the 2026 reporting change bites. For accounting periods beginning on or after 1 January 2026, the amended FRS 102 — which applies to most UK limited companies, not just listed ones — removes the old operating-lease/finance-lease split for lessees. A 36-month contract hire agreement that used to sit off balance sheet, disclosed only in the notes, must now be recognised on the primary balance sheet: a right-of-use asset and a corresponding lease liability are recognised at inception. On 30 vehicles at £400/month over 36 months, that is roughly £432,000 of lease liability appearing in the accounts on day one — even though the cash position has not changed. In the P&L, instead of a single straight-line rental expense, the cost splits into depreciation of the right-of-use asset plus interest on the lease liability. Because interest is higher early in the term, this front-loads the expense — higher reported costs in years one and two, lower later, though the total over the life of the lease is unchanged.

The practical consequences for a growing business with a bank facility are real. Facilities often carry gearing or net-debt covenants, and adding £432,000 of liability shifts those ratios even though no cash has moved — which can erode covenant headroom or, for a business near a threshold, trigger a technical breach. Higher reported debt and front-loaded costs also make the early-year accounts look weaker to a lender or acquirer reading them cold. The total tax relief over the life of the lease is the same as before, but the timing and presentation differ — more accountancy work, less flattering year-one numbers.

Purchase (HP or loan) — the heaviest balance sheet of all. Bought vehicles appear as fixed assets, which looks healthy on the asset side. But vehicles funded by HP or a loan carry the matching debt. A business that borrows £1,080,000 to buy a fleet shows £1,080,000 of hard borrowing on the balance sheet — the kind that affects credit rating and borrowing capacity most directly of the three routes. The P&L then carries depreciation of the owned assets plus interest on the borrowing, and the residual-value risk sits entirely with the business.

The one-line summary. Flexi hire keeps the balance sheet clean and the P&L simple. Contract hire now lands on the balance sheet as a liability and front-loads the P&L. Purchase loads the balance sheet most heavily of all and hands the business the depreciation risk. For a business that values borrowing headroom and clean accounts during a growth phase, that ranking matters as much as the monthly rate.

Underpinning all of this is something many small-company owners never think about: the company has its own business credit profile, built from the accounts it files, that quietly decides whether a lender or hire provider says yes in the first place — worth understanding well before you need it.

Buying 30 vans outright, or on finance, looks compelling if you take the tax headline at face value. The real cash mechanics are very different from the way the purchase case is usually presented.

The capital requirement. A business-specification medium van costs around £34,000–£40,000 excluding VAT; the current Transit Custom range opens at about £32,350 excluding VAT and rises quickly with specification, wheelbase and engine. With volume purchasing, call it £36,000 per vehicle net of VAT. Thirty vehicles: £1,080,000 of capital cost. Even funded entirely through HP or a loan, that is roughly £32,000–£34,000 per month in repayments over 36 months — close to double the flexi hire cost — while the business also carries every pound of maintenance, tyres, servicing and fair wear and tear, because none of it transfers to anyone else under ownership.

The VAT position — the point that catches businesses out. A VAT-registered business can reclaim VAT in full on commercial vans — vans qualify, unlike cars. On 30 vehicles at £36,000 net each, the VAT element is £7,200 per vehicle, or £216,000 across the fleet. The critical question is when it is payable. A hire purchase agreement is treated by HMRC as a supply of goods, so the VAT on the full purchase price falls due upfront, as a single lump sum, at the start of the agreement. It does not spread across the monthly payments — the HP instalments carry no VAT because the whole VAT charge has already been settled. So even with 100% finance on the vehicle cost, the business must find the £216,000 of VAT itself, then reclaim it on its next quarterly return one to three months later. In effect it hands HMRC a £216,000 interest-free loan and waits a quarter for it back. VAT deferral products exist that advance the VAT and recover it within three months, but they add cost and admin and only reschedule the liability.

Depreciation — the cost that does not send an invoice. Vans typically lose 30–40% of their value in the first three years, and the curve steepens at high mileage. A typical van retains around 30% of new value after three years on standard mileage — and this fleet runs 90,000 miles over three years, well beyond the basis those residual figures assume, so the real residual is worse. A £36,000 van worth £16,000–£18,000 after three years is £18,000–£20,000 of depreciation per vehicle — £500–£555 per vehicle per month in real economic loss, before any maintenance. Across 30 vehicles, the fleet loses roughly £15,000–£16,650 a month in value. It sends no invoice, which is why it gets ignored, but it lands in full at sale or replacement — and both hire routes avoid it entirely, because the residual risk sits with the supplier.

The AIA argument, handled honestly. The Annual Investment Allowance lets a business deduct qualifying capital expenditure — including commercial vans — from taxable profits in the year of purchase, up to a permanent £1,000,000 limit. On a £1,080,000 purchase, the first £1,000,000 qualifies for a 100% deduction; at 25% corporation tax that is a £250,000 reduction in the tax bill in year one. Real and valuable — but it reduces the tax bill by £250,000, not the cash cost of the fleet. The business still finds £1,080,000 plus £216,000 of VAT upfront before the relief crystallises at period end, and the relief is a deduction against profit, not a cheque. For a business sitting on surplus cash, the AIA makes purchase attractive. For a growing business reinvesting profit and funding its own expansion, committing over a million pounds to depreciating assets is a fundamental misallocation of capital — the relief softens the edge, it does not change the shape.

Every calculation above assumes the fleet requirement stays exactly as it is for three years. It will not.

When an engineer leaves. When an engineer leaves and the business decides — as growing businesses regularly do — not to refill the role immediately, a flexi hire vehicle goes back on 28 days' notice. The cost stops. Under a 36-month contract, that vehicle keeps invoicing for the rest of the term: an engineer leaving 18 months into a 36-month contract leaves the business paying for a van with nobody in it for 18 months — £7,200 of dead cost per vehicle at £400/month. Across a business losing even two or three engineers over three years without immediate replacement, that is £14,400–£21,600 of unrecoverable commitment that never appeared in the contract hire saving. And early termination is not a clean exit — contract hire agreements commonly carry early-termination charges of 50–100% of the remaining rentals, so handing a van back early can crystallise the obligation as a lump sum rather than end it.

When work goes quiet. A contract ends early, a project slips, work drops for a quarter. Flexi hire scales back at 28 days' notice. Contract hire payments are fixed and independent of whether the van turns a wheel — it sits, and the invoice still arrives. The flexibility premium that looked expensive in the good months turns out to be cheap insurance against the quiet ones.

When the business wins more work. The asymmetry runs the other way too. Adding vehicles is straightforward under any model; it is scaling down that is expensive under contract hire and impossible to do cheaply mid-term. Flexi hire handles both directions on the same 28 days' notice.

The supplier relationship. Nationals operate at scale and by rule. When something falls outside the standard process — a billing arrangement that needs restructuring, a short-notice uplift, an easier payment schedule during a hard month, a recurring fault needing a pragmatic fix — the national's answer is the contract. An independent runs a different calculation: a reliable two-year account that pays on time is worth protecting, and the person you speak to usually has the authority to act. A conversation that takes three escalations at a national can happen in one phone call with the owner of an independent, and the answer is far more likely to be a workable solution than a quotation from the terms and conditions. This is not a promise about any specific supplier — it is a structural point about why independents can be more responsive, and why a direct introduction to a well-matched independent tends to produce a more durable, more flexible relationship than one filtered through a national's account-management layer.

None of this is an argument that flexi hire is always right. It is an argument that for this profile, it is — and being precise about where the alternatives win is what makes the analysis trustworthy rather than one-sided.

Contract hire becomes genuinely competitive when the requirement is fixed, predictable and stable enough to justify the commitment — a business that knows with confidence it needs this many vehicles for this term, with no anticipated headcount changes, low workload volatility, mileage it can forecast accurately enough to avoid excess charges, and the balance sheet capacity and credit profile to carry the liability comfortably. The admin overhead still has to be resourced, but for a stable fleet it can be worth it.

Purchase makes sense when capital is genuinely surplus with no better opportunity cost, when the business intends to keep vehicles well beyond the point at which hiring becomes inefficient, and when the in-house capability exists to run the full ownership cycle without it distracting from the core business.

For the business in this case, none of those conditions hold with the certainty the commitment would demand. The apparent saving disappears once the full cost is rebuilt. The balance sheet liability is real and more visible than ever under the 2026 rules. The VAT requirement on purchase is £216,000 of cash before the first repayment. And the freedom to hand a van back when an engineer leaves, when work goes quiet, or when something unexpected happens has a value that only becomes obvious the first time it is needed — by which point it is too late to buy it. The business is paying a premium for flexi hire. That premium buys operational freedom, a clean balance sheet, a responsive supplier relationship, and the ability to right-size in any direction at 28 days' notice. For a profitable, growing business that does not yet know exactly what it will look like in three years, that is not an overpayment. It is a rational commercial decision — and, on these numbers, the right one.