Contract Hire Agreement Information
A Contract Hire Agreement is also known as a:
- Vehicle hire contract agreement
- Car hire contract agreement
- Vehicle lease agreement
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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