Finance options

Business Contract Hire

Business Contract Hire is commonly referred to as vehicle lease and allows businesses a fixed payment method for the use of a vehicle for a term of normally between 12-48 months. The payments attract VAT of which for cars 50% and for commercial vehicles 100% of the finance element is reclaimable, 100% of the VAT for any maintenance payment is reclaimable. The rental payments are also classed as a true business expense so can be wholly offset against corporation tax. The benefits are fixed monthly payments with no disposal risk but reasonable care has to be taken of the vehicle and also there is an obligation to remain under the stated mileage at the contract inception or the finance company will levy a charge for loss of value.

Personal Contract Hire

Personal contract hire is commonly referred to as a vehicle lease. The vehicle is purchased by the finance company who estimates a value of the vehicle at end of the term and your monthly payment consists of the depreciation and interest. The benefits are simply no residual value risk and fixed payments but the vehicle has to be returned in a reasonable condition and not a greater mileage than stated at contract inception or the finance company will levy a charge for this.

Hire Purchase

Hire purchase allows you to spread the cost of the vehicle purchase price over a term between 12 to 60 months. A deposit is normally required and then the amount financed & interest is paid back with fixed monthly instalments.

Lease Purchase

Lease purchase agreements are normally between 12 to 48 months and offer the same fixed repayments as Hire Purchase but an amount equal to the predicted value of the vehicle at this time is deferred to the final payment. This results in lower monthly repayments but the equally the risk of the resale value lies with yourself with the possibility of a negative equity position if the vehicle is worth less than the predicted amount.

PCP

Personal Contract Purchase has terms normally up to 48 months again with fixed repayments and a guaranteed future value which you pay to own the vehicle at the end of the agreement although you can also choose to hand the vehicle back to the finance company. The vehicle needs to stay within the mileage amount stated at contract inception and also returned in a reasonable condition or the finance company does have the right to levy a charge for the loss in value.

Finance Lease

Finance lease allows a business to obtain a vehicle and use it for the length of the lease and beyond with sub-sequential secondary or peppercorn rentals. Payments attract VAT and also rentals can be offset against corporation tax. Unlike contract hire disposal must be undertaken by the lessee of which normally 99% of the disposal amount can be retained.