Contract hire is the most popular way of hiring a business vehicle with more than half of all new company cars registered each year funded this way. A vehicle is leased to a company for a set time and specified mileage, in return for an initial fee (usually three months rental) and a subsequent monthly charge. At the end of the contractual period, it is returned to the leasing company.
Having gained legal ownership, the new owner can keep the vehicle, sell it on directly, or sell the car back to the finance company for a price agreed at the start of the contract.
Ownership of the vehicle for tax purposes passes to the user on the day the contract is signed, meaning that its cost can be written down on the balance sheet (by claiming capital allowances).
This method gives the users totally predictable motoring costs and cash flow, while keeping administration to a minimum. Also, because the vehicles are then owned by the business at the end of the contract they're able to increase the company's asset valuation.