|
 |
 |
|
|
|
|
|
 |
Business Contract Hire (without Ownership) |
|
|
Business Contract Hire is the ideal solution for those who are looking to finance a vehicle with a minimal initial outlay whilst making convenient use of fixed monthly budgeting.
In terms of commercial vehicle
leasing and financing options, contract
hire is also exceptionally tax efficient
as the overall costs of hiring a car
or van which is used solely for the
day to day running of your business
can be advantageously offset against
your company's taxable profits.
Furthermore, if your business is VAT
registered you can also expect to reclaim
the full amount of the VAT associated
with your monthly lease
cars rental costs if the car or
van which you use is used strictly as
a business vehicle or 50% of the rental
VAT if you also use your company car
for private reasons. |
|
| Advantages |
 |
Fixed monthly payments which are easy to manage |
|
Small initial outlay (typically three monthly payments in advance) |
|
Delivery and collection of the vehicle are arranged by the supplier |
|
Disposal of the vehicle is not your responsibility |
|
The vehicle does not appear on your balance sheet as an asset |
|
50% of the VAT on the contract can be reclaimed if you're business is VAT registered |
|
No risk of depreciation |
|
Residual Value risk is carried by the finance company and not the user |
|
Contract hire vehicles can be exchanged for new ones on a frequent basis |
|
|
| Disadvantages |
|
At the end of the contract you will have no equity on the vehicle |
|
If the contract is terminated early then a penalty charge is payable |
|
Penalties apply for additional mileage |
|
| |
 Top |
|
|
Business Contract Purchase (Ownership) |
|
|
Business Contract Purchase of a vehicle is an excellent choice for those seeking minimal capital outlay, full vehicle ownership and fixed monthly repayments with a fixed annual interest rate.
The main difference between Business Contract Purchase (BCP) and Business Contract Hire is that with BCP the client reserves the opportunity to purchase their chosen vehicle at the end of the contract by paying a lump sum to the commercial vehicle financing company. This predetermined 'balloon payment' is often referred to as the Guaranteed Future Minimum Value.
A typical scenario where a Business Contract Purchase would be considered a shrewd financial venture is when the vehicle in question is a prestige car which would be of more worth to a company if it were to be resold following the end of the contract period as opposed to simply handing it back for a replacement vehicle.
|
|
| Advantages |
|
Fixed monthly payments which
are easy to manage |
|
Small initial outlay (typically
three monthly payments in advance) |
|
The option of buying, selling
or trading in once the contract
has expired |
|
Excellent choice for non VAT
registered businesses |
|
Any interest charges can be
claimed against tax |
|
Cost of rental is allowable
against business tax |
|
If vehicle is returned then
the responsibility of disposal
is eliminated |
|
No depreciation risk |
|
Residual Value risk is carried
by the finance company and not
the user |
|
|
| Disadvantages |
|
If the contract is terminated early then a penalty charge is payable |
|
Penalties apply for additional mileage |
|
Unsuitable for VAT registered businesses as no VAT can be reclaimed |
|
| |
| Top |
|
|
Personal Contract Hire (non Ownership) |
|
|
| Personal Contract Hire is a type of car financing which is designed to meet the needs of the private motorist. In many ways it is quite similar to Business Contract Hire in that it enables you to acquire a new car without having to pay any additional taxes. However, unlike a company car you are allowed complete freedom of choice in terms of your selection of vehicle. |
|
| Advantages |
|
Small initial outlay (typically three monthly payments in advance) |
|
Fixed monthly payments which are easy to manage |
|
Delivery and collection of the car is arranged by the supplier |
|
Disposal of the car is not your responsibility |
|
No risk of depreciation |
|
Residual Value risk is carried by the finance company and not the driver |
|
Cars can be exchanged for new ones
at the end of the contract |
|
|
| Disadvantages |
|
At the end of the contract
you will have no equity on the
vehicle |
|
Penalties apply for additional
mileage |
|
Only 50% of the VAT on rental
vehicles is reclaimable |
|
If the contract is terminated
early then a penalty charge is
payable |
|
| |
| Top |
|
|
Personal Contract Purchase (Ownership) |
|
|
Developed with the private motorist in mind, the Personal Contract Purchase vehicle financing option affords you the benefit of exchanging your vehicle for a new one on a regular basis and without the need of having to pay additional taxes.
This form of car leasing also gives you the chance to return your vehicle at any point until your contract is over.
Additionally, this particular car lease finance package doesn't require a large deposit and there is no risk of depreciation which means that your monthly repayments will also be incredibly affordable.
|
|
| Advantages |
|
The option of buying, selling or trading in once the contract has expired |
|
Considerably low initial outlay (normally three rental payments in advance) |
|
Fixed monthly payments which are easily manageable |
|
No VAT in terms of contract charges |
|
Suitable for those wishing to opt out of a company car scheme |
|
The choice of changing cars on a regular basis |
|
|
| Disadvantages |
|
Penalties apply for additional mileage |
|
If the contract is terminated earlier than agreed then there is also a penalty charge |
|
| |
| Top |
|
|
Hire Purchase/Lease Purchase (Ownership) |
|
|
This is a vehicle leasing product where the customer agrees to make a lump sum payment when the car leasing contract terminates. Apart from the balloon payment which is added at the end of the lease contract, it is practically the same as the traditional Hire Purchase from of car leasing finance.
As an added benefit, it involves no additional mileage penalties and is particularly suitable for companies which are not VAT registered.
|
|
| Advantages |
|
Contract charges are exempt
from VAT |
|
There are no mileage penalties
to incur |
|
Any interest charges can be
offset against your taxable profits |
|
The vehicle will appear on
your balance sheet |
|
Releases capital which can
be used in other areas of business |
|
Complete ownership of the vehicle
including the full responsibility
of usage and disposal thereafter |
|
|
| Disadvantages |
|
Collection and delivery must be arranged by the client |
|
The vehicle may lose its value by the end of the contract |
|
Possible risk of depreciation |
|
Residual Value is carried by the client |
|
| |
| Top |
|
| |
|
Finance Lease (without Ownership) |
|
|
Finance Lease is an incredibly attractive alternative to traditional contract car hire and it offers minimal initial outlay, fixed monthly payments and fixed monthly interest charges as an added bonus.
When you opt for finance leasing, the vehicle itself remains the property of the car lease finance company throughout the entire agreement which means that there are several tax advantages to be gained. Furthermore, the Finance Lease agreement itself can be tailored entirely to suit your company's cash flow situation with a large proportion of your initial outlay being deferred until the contract expires.
The very nature of Finance Leasing means that it is an exceptionally advantageous solution for those in charge of VAT registered businesses as practically all of the VAT which is payable on finance rentals can be reclaimed in full provided that the vehicle is used only for business reasons. In cases where the lease vehicle is also used for personal purposes, the amount of VAT which can be reclaimed is reduced to half.
Once the lease period has expired, the vehicle must then be sold by the client in order to clear up any unbalanced finances. Should the amount raised be insufficient to pay off this outstanding balance, then the appropriate amount must be paid up by the lessee.
|
|
| Advantages |
|
Vehicle Finance can be tailored to meet your specific cash flow requirements |
|
Contract can be taken out either by an individual or a business |
|
There are no mileage penalties |
|
Initial outlay is usually quite low (around three rentals in advance) |
|
Rentals can be claimed against tax |
|
VAT can be reclaimed on the finance agreement provided you are VAT registered |
|
Vehicle can be shown as a balance sheet asset |
|
|
| Disadvantages |
|
Customer is responsible for selling the vehicle at the end of the contract |
|
Proceeds raised from the sale of the lease vehicle may not be sufficient to pay off the outstanding finance balance |
|
Collection and delivery of the vehicle is ordinarily arranged by the client |
|
| |
| Top |
|
| |
|
|
|
|
|
