What is contract hire?

In simple terms, Contract Hire (or Operating Lease) is a method of funding the USE of a vehicle for a set period of time (known as the primary period of hire), but not the overall ownership (or cost of ownership) of it. 

It allows a customer (known as the lessee) to choose the vehicle they want, use it for a set period of time and an anticipated mileage and then give it back to the leasing company (known as the lessor) at the end of the period of hire. The risks and rewards are therefore with the lessor under contract hire agreements.

The lessee is renting the vehicle from the lessor for a fixed period of time and pays a fixed (normally monthly) rental for the use.

The lessee is not responsible for the disposal or sale price of the vehicle at the end of the contract – which makes it a very easy and risk free way to run a vehicle.

The key risk to the lessee is where the agreed mileage limit is exceeded or if the vehicle is not maintained and kept in good condition.