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Getting the right deal - Contract Hire

Getting the right deal - Contract Hire

There are huge variations around the industry in what you get with Contract Hire.

How long is 5 years anyway?

You typically expect a Contract Hire term to be 5 years – we would quote on a 3 month advance, plus 57 rentals, the final 3 at the end not charged.

Some suppliers might present it differently – 1+60, 3+60 even 3+63.

And sometimes we see a “1 plus” deal where the one payment at the start equates to 3 months rentals.

As long as you recognize the number of months involved it’s fine.But if a deal is quoted as 5 years but is actually 63 months, then your comparisons will be inaccurate.

No effort is required from On3 – just saying what it actually is does the job – make sure our competitors do the same.

Is the agreed rate for the whole period?

A lot of suppliers index link the rate, which means you could get an annual increase in line with RPI.Check if the terms allow for an increase linked to a genuine increase in costs, or if it can be done regardless. And check if there is a double-lock such as “RPI rate or 2.5%, whichever is the greater”

How much can you use it?

A popular way of keeping the rate low is to sign the customer up on a low hourly usage package.

Why do this?  2 main reasons:

Opens the door for charging for excess hours as a flat rate per hour or as a percentage of the rental rate. (watch out, combined with the above mentioned RPI link, this could make extra hours very expensive come year 5.)

Makes the deal look cheaper in your evaluations.

There's nothing wrong with a low hours deal - providing it reflects the hours you actually intend to do.

Service Support

Make sure the deal includes full maintenance - Operating Lease deals are often rental only with all servicing and breakdown response charged on top. Oh, and make sure batteries and chargers are covered.