‘Where many vehicles are to be financed, companies will normally be asked to sign a master agreement.
This will contain all of those terms and conditions of the finance or lease agreement that are to remain unchanged as each vehicle is financed.
When the time comes for a new vehicle to be financed, you will be asked to sign a schedule to the master agreement. This will be a brief document – probably just one page – showing only the information that is specific to that vehicle.
For example, the rental or repayment, start date, end date, registration number, vehicle identification number etc. Once signed, the schedule will form part of the master agreement.
If you carry out, or fail to carry out, certain obligations or actions set out in the agreement you will be deemed to be ‘in default’ of your obligations.
The contract will set out the consequences if you are in default of your obligations under the agreement. These will normally include allowing the lessor to repossess the vehicle, to enter into your premises to do so if necessary and to charge interest on late payment at a default rate.
The contract will show how the lessor should calculate the sum payable by you on default. This amount, often called the ‘termination sum’, is designed to guarantee that the lessor will cover the balance outstanding in his books on termination.
In large transactions it is normal to see a tax variation clause, giving the lessor the right to alter the rentals (even retrospectively or after the lease has ended) in the event of tax changes.
When they calculate their lease rentals and enter into leases, lessors assume they will get certain tax benefits including capital allowances and interest relief on borrowing costs.
If the tax rules change during the lease, the lessor’s return changes. Lessors could find that they have made a loss on a contract solely because of changes in tax regulations. A tax variation clause will allow lessors to charge you more, even after the lease has ended, so that they still earn the ‘net of tax return’ they planned to earn when they entered into the lease.
These clauses are almost always seen in master leases, but they are sometimes left out of single-vehicle leases.
If you have a disagreement with your lessor you can try to resolve it amicably. The next step might be to make a complaint to the appropriate trade body, perhaps the British Vehicle Rental and Leasing Association or the Finance and Leasing Association.
Most contracts nowadays require payments to be made by direct debit.
You sign a direct debit mandate to authorise the lessor to collect money from your bank account without your further involvement.
If they take the wrong amount, your bank is contractually bound to refund this to you on demand. Most lessors will be reluctant to move from their insistence on direct debit payment for all but the largest clients.
It is worthwhile mentioning that even though the standard agreement you are asked to sign may be pre-printed, it may still be negotiable.
If your business is big or important enough to the lessor, you may be surprised at how much you can get them to change their standard terms in your favour.
If there is something in there which is unacceptable to you, stand your ground and ask for it to be changed.
And if they won’t change it, there may be others out there in the market who will offer you what you want.
The rental you pay the contract hire company assumes you will use the vehicle until the contractual end date and then return it.
However, during the life of the agreement you may need to ask the lessor to perform services that are not mentioned in the contract. Most contract hire companies will accommodate any reasonable request, though some will make a charge for these. It is advisable to specify them in the contract.
If you wish to take a leased vehicle abroad you have to obtain a certificate confirming the owner has consented.
A special VE103 certificate is required and many contract hire companies levy a small charge for this service.