BUDGET changes to the rules governing finance leasing will have a bigger effect on the increasing cost of contract hire than initially anticipated. Finance experts have only just grasped the full implications of small print hidden within the Finance Bill and are warning of significant increases in some contract hire companies' costs.

The changes involve a tightening of the rules on capital allowances relating to finance leases and will effectively make the funding a contract hire company needs to finance its vehicles more expensive. Because only a relatively small number of vehicles are funded using finance lease, it was initially thought the measures would have little impact, but experts have since realised that many contract hire companies are themselves funded by finance lease.

The British Vehicle Leasing and Rental Association has called upon the Chancellor to rethink the changes prior to the Finance Bill becoming law. BVRLA members operate a total of 1.4 million cars and trucks of which more than half are funded through finance leasing. The changes will impose an additional £42 million a year on members which will have to be passed on to corporate customers via higher rental charges.