Before You Enquire

Contract hire explained — a finance-based vehicle arrangement for planned business use.

Contract hire is a finance product, not a rental arrangement. This page explains how it works, what makes it different from flexi hire and long-term hire, where FCA regulation applies, and when contract hire tends to suit — and when it does not.

Contract hire is a finance agreement — not short-term rental and not vehicle purchase
FCA-regulated product arranged through the hire supplier — UVH is the introduction service only
Early termination carries significant charges — the arrangement is designed for stable, planned requirements

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What Contract Hire Is

Contract hire is a finance-based vehicle agreement running 24 to 60 months.

Under a contract hire arrangement, a business agrees to hire a vehicle over a defined term — typically two to five years — at a fixed monthly cost. The cost is calculated based on the vehicle's expected depreciation over the term, the agreed mileage allowance, and any maintenance package included. At the end of the contract, the vehicle is returned. There is no option to purchase the vehicle at the end. Unlike flexi hire or long-term hire, contract hire is a financial product and is regulated accordingly.

Fixed term of 24 to 60 months — agreed at outset, not rolling
Fixed monthly cost covering depreciation and typically maintenance
Annual mileage cap — excess mileage charges apply if the allowance is exceeded
Vehicle returned at end of term — no option to purchase
Regulated by the Financial Conduct Authority (FCA) where credit is involved

How It Differs from Rental

Contract hire is a finance product — not a rental model.

This distinction matters. Flexi hire and long-term hire are rental products — the business pays for the use of the vehicle, month by month or over a defined period, without entering a finance agreement. Contract hire involves a financial commitment that looks more like a business finance agreement: a fixed term, a fixed monthly payment derived from a depreciation calculation, regulated credit terms, and formal credit assessment. Businesses considering contract hire should treat it as a financial commitment rather than a hire decision.

Finance, Not Rental

Contract hire is priced on depreciation, not on daily or monthly rental rates.

The monthly cost under a contract hire arrangement reflects the expected fall in vehicle value over the term, divided over the hire period. This is why longer terms and higher-mileage allowances can change the monthly cost significantly — both factors affect the depreciation calculation.

FCA Regulation

Contract hire is regulated by the FCA — through the supplier, not UVH.

Where contract hire involves credit — which it typically does — the arrangement falls under FCA regulation. The supplier who provides the contract hire agreement is the FCA-regulated entity. UVH is an introduction service: it reviews a business vehicle hire enquiry and introduces the business to a single suitable independent supplier. UVH does not arrange the contract hire agreement, does not provide credit, and is not FCA-regulated in this capacity. Once the introduction is made, the contract hire arrangement is negotiated and agreed directly between your business and the supplier.

Who Is Regulated

The supplier holds the FCA authorisation — not UVH.

Before entering a contract hire agreement, businesses should confirm the supplier's FCA registration. The FCA register is publicly searchable. If the supplier is arranging a finance-based product, they should be able to provide their FCA authorisation reference.

Early Termination and Mileage

Contract hire carries two significant cost risks: early exit and excess mileage.

Early termination charges

Contract hire agreements are designed to run their full term. If a business needs to exit early — because of a change in circumstances, a reduction in fleet size, or a business closure — the exit cost can be substantial. Termination charges are typically calculated based on the outstanding monthly payments and the vehicle's residual value shortfall at the point of early return. Businesses should read early termination terms carefully before signing, and consider whether the requirement is genuinely stable enough to justify the commitment.

Excess mileage charges

The monthly cost of a contract hire arrangement is calculated against an agreed annual mileage figure. If the vehicle exceeds that figure over the term, excess mileage charges apply at the end of the contract. These are calculated per mile above the agreed allowance and can be significant on vehicles driven heavily above the agreed cap. Setting a realistic mileage allowance at the outset — slightly higher rather than lower — is generally the safer approach.

When It Suits — and When It Does Not

Contract hire suits settled, long-term requirements — not changing or uncertain ones.

When contract hire tends to suit

Businesses with a clear, stable vehicle requirement over multiple years. Fleet planning where cost predictability over a two-to-five-year period is the priority. Requirements where the vehicle type, mileage, and operating location are already known. Larger businesses with established fleet management processes and the ability to commit to fixed-term financial agreements.

Where a different hire route may suit better

Businesses with variable demand, uncertain project timelines, or requirements likely to change within 12 months should consider flexi hire or long-term hire first. The early termination exposure in contract hire is not worth carrying for requirements that may change. Similarly, growing businesses that are still working out their vehicle requirement may find that flexi or long-term hire gives them more room to adjust before locking in a multi-year commitment.

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