Questions regarding Van Contract Hire Terms

I'm soon to lease a van on a full maintenance contract hire agreement, and have a few questions about it:

The bit that most concerns me is the following (scanned from the contract):

Basically my worry is that all that basically says two things:

1. They have calculated their return on investment based on all these facts - capital allowances, corporation tax rates and due payment dates (w.r.t. their accounting period), tax relief allowances in respect of interest on borrowed funds by them (the Owner), etc etc, and if any of these things change, causing their after-tax return on investment to decrease, then they can increase the monthly rental charges to compensate, so that their return on investment is as they had initially calculated.

In other words, I take all the risk and they take none.

1. If the VAT rate increases between the start date of the contract and the time when they come to dispose of the van, then I have to compensate them for any difference in what they owe the VAT man (if I'm wrong on deciphering all this someone please let me know). Now surely VAT would be charged on top of the selling price of the van when it's disposed of at auction, so whatever amount they owe HMC+E they would be collecting on top of the sale price (which it would be made clear was exclusive of VAT, I'd assume), so how can they justify asking me to compensate them in this respect?

A few more questions:

What is the realistic risk involved if I was to sign this agreement? Is it realistic that I could get out of these points, or do I just accept that financial institutions are clever bastards that make contracts water tight to protect themselves? (which leads on to the next point) Do all lease contracts have these sort of terms imposed? Does anyone reading this have any experience of, or know anyone who has been caught out by such clauses and ended up having increased payments, and if so, how much did they increase by?

There are also another couple of points regarding direct debit terms. Basically there's a clause in the terms and conditions that says I'm waiving my rights to being given 14 days' notice of any changes in charges

even though, on the same piece of paper, the standard Direct Debit Guarantee is there in black and white

I already told you. RUN AWAY. You can't waive your rights to 14 day notice..

Heh, not that I don't appreciate your advice (and trust me, I do) - just thought I'd see if I could get any more information by mentioning it on the finance group (x-posted to u.r.c.misc as a lot of people don't read mods).

I've since spoken at length to one of the account manager type people from the funders and I've basically been assured that the "only" reason that the monthly charge will change, is if the VAT rate changes (and all the other stuff - capital allowances, corporation tax rate changes, etc., that affect their rate of return on investment), and those changes are in the contract anyway, so they can't change it for any reason other than those, and the waiving of rights to 14-day notice is basically in place to save them the trouble of writing out 10,000 letters (that's roughly how many vehicles they deal with) to inform people that their payments are to be a bit more due to the VAT rate increasing (or whatever).

So basically my mind's at ease as far as the whole lack of notice for the direct debit thing, as the reasons behind any changes are limited elsewhere in the contract. It's the first bits I don't like, and it seems that I've found another lot that are marginally more expensive, but don't seem to have contracts that could leave me out of pocket unexpectedly.

A salesman has reassured you. Hmm, so you believe them?

OTOH I reckon you're fairly safe on those things. If the interest rate changes, can they change how much they charge you? Cos that's more likely to happen.

cheers, clive

Did you phone Salford Van Hire?

No, the salesmen I dealt with didn't seem to have a clue, and reassured me a lot of things completely contradictory to the contract. It's just been pointed out to me that they can't alter the rate unless it's due to very specific reasons (VAT/Corp'n tax changing, and all the other things in the link at the bottom), so it's not like they'd suddenly increase it a bit just because they feel like it, as they'd be breaching the terms of the contract.

Nope, no mention of that anywhere - they've obviously based it all on what they consider to be something fairly safe, and it's all probably underwritten to cover their losses anyway.

Clause (g) worries me though - if the 'Owner' of the van (as per the definitions of the contract) does not actually purchase it, but hires the van from the person buying the van ('Head Lessor') then if the Head Lessor puts up their hire rate, there increases the rate that I would pay. Now call me cynical, but the two could be in cohorts with each other, and the Head Lessor could put his rate up a fraction (on all the vans he owns), leaving the 'Owner' within their rights as per the contract to whack up their rates a bit. Easy way to increase profits a reasonable amount if the Head Lessor is financially backing a few thousand vehicles.

Yup - meant to mention that. First guy I spoke to said that they couldn't do contract hire for anyone but a limited company, but he said he'd get someone to call me back anyway. That guy basically said that I'd probably struggle without proper accounts (which I've been very lazy with and am in the throws of getting together), but I mention I'd been approved elsewhere for a contract hire van, and he asked what I'd been quoted. He said, off the top of his head, that I'd be looking in the ballpark of 95/week + VAT, fully maintained, relief vehicle, etc etc. Other quotes I've had have been around 325-330+VAT/month, so they're not that competetive tbh. Cheers for the info anyway.

Yes... I'm quite familiar with that old chestnut myself of late...

Oh, they didn't do that... they just didn't seem to be all that clever, when it came to making sure they'd covered everything, not least getting signatures on the important pieces, at the right times.

Which was nice, when it came to disputing various aspects. :-)

DING!!

At least nothing gets past you.

No worries. Salford Van Hire and Hill Hire are the two top leasing/contract hire companies in haulage which is why I mentioned them. I take it the other quotes offered a similar level of service?

Heh - I pride myself in having at least half a clue at least half the time!

I pity the poor sods who don't bother properly reading the contract, because they've been told "it's all standard stuff" and have 100% trusted what the salesman has told them, only to find they don't have a leg to stand on as "he told me over the phone" doesn't hold much weight and the contract does.

Yup, I've made sure all quotes have had all the same 'features' so I'm comparing like with like. Basically, standard van + plylining and slam locks, leccy mirrors/windows, and a relief vehicle supplied at any time the van's off the road. All with full maintenance, which annoyingly doesn't cover oil top-ups, but as long as I know what I'm dealing with, it's not a major cost - a few litres in the first 10k or so whilst running in, and touch wood that should be it.

What's the benefit in contract hire over buying one yourself with a bank loan? Interest charges should be allowable against tax, and with using perhaps a broker to find the best buy you won't be into paying the hire company's profits?

Two words. Cash flow.

I've done all the sums - considered buying something 2-3 years old and replacing it sooner (my contract insists on a van

Do new cars still use oil in the first bit of time then? (says he with a 1 year old car)

Yes and no.

if you are still looking for quotes and in the Manchester area let me know and I may be able to help.

unfortunatley I need to catch up so if you let me know what, why and when, and if you have any specific requests I can try and sort something out.

alternatively tell me where to stick my contract hire

Well I'm not in the Manchester area, but most places can arrange delivery, can't they?

I'm after a Transit 280 MWB Medium Roof, 2.0 TDCi 125PS, with plylining, slam locks, electric windows and mirrors, and a full maintenance contract for 30,000 miles per year, with a guaranteed relief vehicle supplied in case of breakdown/warranty work/servicing. And a contract that won't shaft me something rotten.

Stick it my direction if the price and terms are right.

sorry, its a local firm for local people only ;-) give us a rough location and I will see what I can do although my MD tends to limit us to the manchester area I will try and make some money out of you.

Courier work? Sorry, I read your posts on occasion and I am sure you have said before but I don't usually pay that much attention.

Have you a preference on colour, does it need signwriting? Are you specifically after a MWB or will a LWB at a similar price be ok?

I think the guaranteed replacement vehicle may be my downfall, I am sure I don't supply one during servicing, will have to check my own small print and see if I can work around it.

I will let you know asap if I can help, if I can't I may be able to refer a few people who can.