Renting a car for a specific fixed amount of time and at a relatively low price is known as a car hire contract. Many car rental companies offer a contract car hire option, and the industry is consequently fairly competitive (which is of course great news for the consumer).
Contract car hire is conceptually composed of two elements:
- The person or business / company leasing the car never actually owns the vehicle in question - i.e. the car is leased
- The car is to be used for a pre-fixed period of time that has been agreed upon by the rental company and the person or company leasing the vehicle in question
The contract car hire industry is flourishing due to the business trend of offering company employees various benefits. Of all the benefits any company can offer an employee, the bestowing of a free company car is considered to be the single most symbolic and appreciated perk that any staff member is ever likely to receive. Most contract car hire occurs within this sector (i.e. car rental companies have agreements with businesses who in turn offer company cars as an incentive to their most valued employees).
By never actually owning a car, the company employee benefits in a variety of ways:
- Most importantly, the company employee receives a free, new car to use whenever and wherever he wants - a very nice bonus in these difficult credit crunch days. Other than the purchase of property, a car is the single most expensive acquisition that most people make in their entire lives. Not only does any individual need to deposit a substantial amount of capital into purchasing the car itself, but the real value of the money spent also decreases as the car's value depreciates - this in addition to the interest that the capital laid out on purchasing a car would otherwise be making.
- The car's temporary owner will not ever have to pay for any repairs that the car needs (and these will be few anyway as the car is new).
- The company employee will receive a brand new car every four years or so (this is standard contract car hire practice).
In short, as a result of receiving a company car, the employee will find himself better off financially. He will also be the (temporary) owner of a practical status symbol of which he can be proud.
As far as the business / company is concerned, not only is the money that they are paying out for the contract car hire deductible against corporation tax, but most importantly, they are rewarding a valued member of staff.
It may not be very environment friendly, it may be relatively costly, it may arguably also be quite unnecessary, but business corporate culture is well aware that ultimately, a satisfied employee is also a productive and loyal worker.
Return to the information page for more about short term car leasing
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