What is a Contract Hire Agreement?

A Contract Hire Agreement is a contract made between a vehicle owner and an individual or company who leases the vehicle for a predetermined amount of time. Individuals and companies may use a Contract Hire Agreement to lease new and previously-owned cars, trucks, and motorcycles. However, you can also use the agreement with any motor vehicle that has a Vehicle Identification Number (VIN), which may include motorized scooters and recreational vehicles.

Who are the parties in a Contract Hire Agreement?

The owner is the party who owns the vehicle and the hirer is the party who leases the vehicle. If two people co-own a vehicle, you can include multiple owners within your Contract Hire Agreement. If multiple people are leasing a vehicle together, such as spouses, you can include multiple hirers.

How do I write a lease agreement for a vehicle?

Prepare a Contract Hire Agreement by compiling the necessary information: Owner and hirer details : specify whether a party is an individual or organisation, and provide names and addresses Vehicle details : specify if the vehicle is new or used, the purpose of the vehicle, and the make, model, year, colour, and VIN Lease details : outline the lease length and the allowable limit of kilometres per year Cost details : determine the amount the hirer will pay by providing the retail value, residual value, security deposit amount, down payment amount, interest rate, and VAT rate Payment details : specify the first payment’s due date, and if the owner allows pre-authorised payments or charges late fees Termination details : explain the rules regarding early termination of the lease Warranty details : clarify the validity of the manufacturer’s warranty and if the owner will provide supplementary coverage Insurance details : outline the minimum insurance coverage the hirer must obtain and the maximum deductibles for fire, theft, and collision Additional details and clauses : if needed, include a term giving the hirer an option to purchase LawDepot’s Contract Hire Agreement template asks you a few simple questions. Based on your answers, we’ll customise and create your document for you.

Should I use a Contract Hire Agreement between an individual and a company?

Yes, a Contract Hire Agreement is a necessary document when an individual leases a vehicle from a company. Generally, a dealership that leases vehicles will have its own documentation that protects the company and its hirers. However, if you’re negotiating a vehicle lease with a company that doesn’t ask you to sign a contract, you can use LawDepot’s Contract Hire Agreement template as a way to protect all parties involved.

When leasing a vehicle, what am I responsible for?

You are responsible for obtaining the necessary insurance coverage and maintaining the vehicle. If you return the leased vehicle with excessive interior wear, dents or scratches, or any significant mechanical damage, the vehicle owner may charge you for the repairs. Some owners may limit the number of kilometres the hirer can use. In this case, you’re responsible for keeping track of your mileage. If you exceed this limit, the owner may charge a mileage fee at the end of the lease. Alternatively, an owner may offer a vehicle lease with unlimited mileage.

Why should I use a Contract Hire Agreement?

Use a Contract Hire Agreement to protect the interests of both the owner and the hirer. Documenting the lease terms helps prevent misunderstandings between the two parties and provides proof in the event of a legal dispute. If you’re negotiating lease terms with another individual, you likely won’t have access to a typical dealership lease form. Instead, use a Contract Hire Agreement. For example, you could use this document when loaning your van or truck to a friend or family member for an extended period of time.

What is a Contract Hire Agreement with the option to purchase?

Including an option to purchase in a Contract Hire Agreement gives the hirer the choice to buy the vehicle at any time during the lease or at the end of the lease. Generally, the purchase price is the residual value of the vehicle, unless the hirer negotiates a lower price. The residual value is the estimated value of the vehicle at the end of the lease term.

Can I cancel a Contract Hire Agreement?

Your ability to end your lease early depends on the contract and the other party’s willingness to accommodate your request. If the other party consents to early termination of the agreement without penalty, you’ll be able to end your lease without any problems. However, if a Contract Hire Agreement states that the hirer is responsible for the difference between the residual value and the realised value when terminating early, the hirer will have to pay. The realised value is the actual sale price that the owner can sell the leased vehicle for after the hirer terminates the lease early.

What happens at the end of a vehicle lease?

At the end of the vehicle lease term, the hirer returns the vehicle to the owner. If the hirer paid a security deposit at the beginning of the contract, the owner will inspect the vehicle and determine if the hirer will receive their deposit back. Besides properly maintaining your leased vehicle, you can better ensure the return of your security deposit by removing all your personal items from the vehicle, vacuuming out the interior, and washing the exterior.

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Contract Hire Agreement

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Your Contract Hire Agreement

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Initials: ______________________________ Page of

CONTRACT HIRE AGREEMENT

THIS CONTRACT HIRE AGREEMENT (this "Lease") dated this 24th day of October, 2021

BETWEEN:

________________________ of _____________________________________
(the "Hirer")

OF THE FIRST PART

- AND -

________________________ of _____________________________________
(the "Owner")

OF THE SECOND PART

IN CONSIDERATION of the mutual covenants and promises in this Lease and other valuable consideration, the sufficiency of which consideration the Parties hereby acknowledge, the Owner leases the Vehicle described in this Lease to the Hirer, and the Hirer leases the Vehicle from the Owner on the following terms:

Vehicle Details
The Owner desires to lease the vehicle described as a new 2021 __________ __________ __________, with vehicle identification number __________ (the "Vehicle") to the Hirer, and the Hirer desires to lease the Vehicle from the Owner for personal, family or household use.
The Owner owns the Vehicle that is the subject of this Lease.
Lease Cost Disclosure
The full retail value of the Vehicle as of this date is £1.
The amount to be amortised over the term of the Lease is £1.00.
The residual value (the "Residual Value") of the Vehicle is £_______.
The Lease interest rate is 4.5% per annum.
The term of the Lease is one month (the "Term").
This Lease includes unlimited miles. The Hirer will not be required to pay any fees for miles used.
The Hirer will provide a down payment of £_______, which will be subtracted from the amount to be amortised over the Term.
The total amount payable by the Hirer upon signing this Lease is £1.00.
The monthly payment under this Lease is £1.00 (the "Monthly Payment"). Any VAT would be allocated over the Term of the Lease and added to that monthly payment. The first payment will be due upon signing and the following payments will continue each month on the same day of the month as the Lease is signed. If a monthly payment is due on the 29th, 30th, or 31st, then it is due on the last day of the month in a month that does not have a 29th, 30th, or 31st.
Monthly Payments may be made by bank transfer, cheque, post-dated cheques, money order, bank draft or pre-authorised payment.
At the conclusion of the Lease, if all payments are made, the total cost of the Lease will be £1.00, excluding any cost for repairing excess wear and tear to the Vehicle.
Except as expressly provided in this Lease, no warranties, either express or implied, statutory or otherwise, as to any matter whatsoever, have been given by the Owner.
Hirer Obligations
The Hirer will assume all risk of loss and damage to the Vehicle. The Hirer is responsible for insuring the Vehicle based on its full value, with the following coverage:
1. bodily injury and property damage coverage in the minimum amount of £1,000,000;
2. comprehensive fire and theft insurance with a maximum excess of £250; and
3. collision insurance with a maximum excess of £250.
The Hirer will ensure that the Owner is named as registered owner, and as "Additional Insured" and loss payee in the insurance policy (the "Insurance Policy").
The Hirer agrees to co-operate with the Owner and the insurance company in pursuing or defending any claim or action resulting from the use of the Vehicle. Any award or money the Hirer receives as a result of a claim or action is to be assigned to the Owner. If the Hirer fails to maintain insurance or if a claim is denied by the Hirer's insurance company for any reason, the Hirer remains responsible to pay the total cost of the Lease.
The Hirer agrees to indemnify the Owner from any loss, and in order to prevent such loss, the Hirer will do the following:
1. keep the Vehicle free of encumbrances, such as fines and liens;
2. indemnify the Owner from all claims and expenses resulting from the maintenance and use of the Vehicle; and
3. pay all amounts owed under this Lease without deducting any amounts the Hirer claims to be owed by the Owner.
The Hirer is prohibited from using, transferring, or altering the Vehicle, as follows:
1. the Vehicle is not to be used by drivers without an appropriate licence or those restricted under the Insurance Policy;
2. the Vehicle is not to be used illegally, in a manner contrary to the Insurance Policy, or as a vehicle for hire or public transport;
3. the Hirer will not transfer or assign this Lease, or ownership of the Vehicle, to a third party, except with the Owner's prior written consent. The Hirer will also ensure that the Vehicle is not seised, confiscated, or involuntarily transferred, even if the Vehicle is the subject of judicial or administrative proceedings;
4. the Hirer will not remove the Vehicle from the country in which this Lease is signed without the Owner's prior written consent, with the exception of trips within continental Europe of less than 60 days; and
5. the Hirer will not install accessories in the Vehicle, or alter the Vehicle in any way, without the Owner's prior written consent.
During the Term of the Lease, the Hirer will be responsible for paying all fees required for registration, licensing, testing, and any inspection of the Vehicle requested by a government or other authority. The initial cost of registration must be paid prior to removing the Vehicle from the Owner's possession.
Inspections
The Hirer acknowledges that the Vehicle has been inspected and the Hirer accepts the Vehicle as being in a good state of repair, not including manufacturer's defects which would not have been visible upon inspection.
The Owner has the right to inspect the Vehicle, without prior notice, at all reasonable times during the Term of this Lease.
Event Of Default
The Hirer will be in default under this Lease if:
1. the Hirer fails to make a Monthly Payment on the due date;
2. a bankruptcy, receivership, or insolvency proceeding is initiated by the Hirer or against the Hirer;
3. a creditor or a government authority seises the Vehicle;
4. the Hirer has misrepresented personal or financial information;
5. the Hirer is no longer living;
6. the Vehicle is stolen or damaged beyond repair;
7. the Vehicle is not returned at the end of the Term; or
8. the Hirer breaches any other term of this Lease.
In the event that the Hirer defaults under this Lease, the Hirer will be required to pay the amounts applicable to the Vehicle during the remainder of the Term.
If the Hirer defaults under this Lease, the Owner will pursue the remedies outlined in this Lease, in addition to any other remedies allowed by law. If the Hirer defaults, the Owner may terminate this Lease, and may recover the Vehicle and sue the Hirer for damages.
Excessive Wear and Tear
The Hirer is responsible for ensuring that the Vehicle is regularly maintained and is kept in good repair. Regular maintenance and repair includes, but is not limited to, the excessive wear and tear provisions below. The Hirer is to pay the costs of regular maintenance and any costs for repairs not covered by warranty.
Excessive wear and tear will include, but is not limited to, the following, even if covered by the Hirer's Insurance Policy:
1. cracked, damaged, or tinted glass;
2. dented or damaged body panels, wings, lights, or paint;
3. missing equipment or accessories that were provided with the Vehicle, including but not limited to wheel covers, jack, wheel wrench, and spare tyre or regular tyres;
4. tyres with less than 3mm of tread remaining at the lowest point;
5. damage to the interior of the Vehicle, including but not limited to dash, seats, floor covering, upholstery, truck liner, and center console (if applicable); or
6. mechanical damage that affects the safe, proper, or lawful operation of the Vehicle, which would include damage that causes the Vehicle to fail a safety inspection in the country where this Lease is signed.
If the Vehicle has excess wear and tear, there will be a charge to the Hirer for the excess wear and tear.
During the Term, damaged or lost parts, equipment, or accessories may be replaced with items of equal or better quality and construction, and replacement items that meet this standard will be accepted as original items, upon return of the Vehicle.
Returning the Vehicle
When the Hirer returns the Vehicle at the end of the Lease, the Hirer must pay the following amount:
1. the cost of repairs needed as a result of excess wear and tear.
The Hirer may return the Vehicle at any time during the Lease, by paying the following amounts:
1. the Monthly Payment multiplied by the number of months remaining in the Term;
2. the cost of repairs needed as a result of excess wear and tear; and
3. any outstanding amounts under this Lease.
After the Hirer has returned the Vehicle and paid any required costs and fees, the Owner will return the following amounts, or the remaining portions of these amounts, to the Hirer:
1. any money received from an insurance claim or action that is not used to repair or replace the Vehicle.
Realised Value
In this Lease, Realised Value is understood to mean any of:
1. the price received by the Owner for the Vehicle at disposition;
2. the highest offer for disposition of the Vehicle; or
3. the fair market value of the Vehicle at the end of the Term.
The Hirer will not be held liable for the difference between the Residual Value of the vehicle and its Realised Value.
General Provisions
This Lease may not be assigned to a third party without the Owner's prior written consent and approval.
This Lease will pass to the benefit of and be binding upon the Hirer's respective heirs, executors, administrators, successors and assigns.
This Lease may only be amended or modified by a written instrument executed by both parties to this Lease.
All costs, expenses and expenditures including, and without limitation, the complete legal costs incurred by enforcing this Lease as a result of any default by the Hirer, will be added to the amount then outstanding and will immediately be paid by the Hirer.
The clauses and paragraphs contained in this Lease are intended to be read and construed independently of each other. If any part of this Lease is held to be invalid, this invalidity will not affect the operation of any other part of this Lease.
If there is a conflict between any provision of this Lease and any form of lease prescribed by applicable legislation of (the "Act"), that prescribed form from the Act will prevail and such provisions of the Lease will be amended or deleted as necessary in order to comply with that prescribed form. Further, any provisions that are required by the Act are incorporated into this Lease.
Headings are inserted for the convenience of the parties to this Lease only and are not to be considered when interpreting this Lease. Words in the singular mean and include the plural and vice versa. Words in the masculine mean and include the feminine and vice versa.
This Lease constitutes the entire agreement between the parties to this Lease and there are no further items or provisions, either oral or otherwise.
The Hirer is entitled to a complete copy of this Lease. This Lease should not be signed until all terms have been set out and the Hirer has read it entirely.
This Lease will be governed by the laws of .

IN WITNESS WHEREOF the Parties have executed this Lease on this _______ day of _______________________.

	_______________________________ ______________________(Owner)
	_______________________________ ______________________(Hirer)

NOTICE TO THE HIRER:

(1) This is a lease. You are not buying the motor vehicle previously described;

(2) Do not sign this Lease before you read it or if it contains any blank spaces to be filled in;

(3) You are entitled to a completely filled in copy of this Lease when you sign it;

(4) Warning -- unless a charge is included in this Lease for public liability or property damage insurance, payment for that coverage is not provided by this Lease.

I do hereby acknowledge receipt of a completed and signed copy of this Lease.	________
	Hirer Initials

I do hereby acknowledge receipt of a completed and signed copy of this Lease.	________
	Owner Initials

Itemisation of Gross Capitalised Cost

(A) Value of the vehicle as equipped at the time of entering into the Lease ............................................................................................................					£1
(B) Values and descriptions of accessories and optional equipment the Owner agrees to add to the vehicle after entering into the Lease ...............					none
(C) Premium to be paid for each policy of insurance ................................					none
(D) Charge for each service contract ..........................................................					none
(E) Outstanding Lease balance or prior credit balance .............................					none
(F) Itemisation of any other good or service not included above ..............					none



(G) Total Gross Capitalised Cost .............................................................					£1.00

Monthly Payment Calculation

Gross capitalised cost. The agreed upon value of the vehicle (£1) and any items the Hirer pays over the Term (such as service contracts, insurance, any outstanding prior credit or Lease balance) ....................................................................................................		£1.00
Capitalised cost reduction. The amount of the trade in allowance and down payment made by the Hirer to reduce the gross capitalised cost ...................................................................................................................	-	£__________
Adjusted capitalised cost. The amount used in calculating the periodic payments .................................................................................................. (This amount along with the additional early termination charges will be used in determining your early termination liability.)	=	£1.00
Residual Value. The value of the vehicle at the end of the Lease used in calculating the base monthly payments ................................................	-	£__________
Depreciation and any amortised amounts. The amount charged for the vehicle's decline in value through normal use and other items paid over the Term ............................................................................................	=	£1.00
Interest charge. The interest charged in addition to the depreciation and any amortised amounts .......................................................................	+	£0.00
Total of base monthly payments. The depreciation and any amortised amounts plus the interest charge ...............................................................	=	£1.00
Lease payments. The number of payments in your Lease .....................		/ 1
Base monthly Payment............................................................................	=	£1.00
Monthly VAT..........................................................................................		_____
Total Monthly Payment...........................................................................	=	£1.00