Contract Hire – Contract Purchase – Finance Lease – Lease Purchase

Hire Purchase Flat Rate – Hire Purchase Variable Rate

Contract Hire:

For all new and nearly new cars and vans – with a small initial rental payment and subsequent low monthly rentals 

1. Tax efficient – rentals allowable against corporation tax
2. Initial Vat savings – the funder reclaims all the vat and rentals based on the net vat cost
3. Subsequent Vat savings – vat charged on rentals is part or fully reclaimable
4. No depreciation concerns – vehicle never owned by the customer
5. No disposal problems – vehicle collected at the end of the contract
6. Flexible contract period – from 2 to 4 years
7. Full choice of vehicles – all makes available
8. Off balance sheet funding – vehicles do not appear as assets
9. Maintenance option – contract can include maintenance if required
10. Rental costed according to usage – based on predicted ‘miles per annum’ use 

Contract Purchase:

For all new cars – with a small initial rental payment and subsequent low monthly payments – option to purchase at the end of the contract

1. Tax advantageous on higher value cars – above approximate £25,000 list price
2. No vat savings – no one is able to reclaim vat included in the price of the car
3. No vat charged on rentals – as this is a ‘purchase’ option, no vat is payable on rentals
4. No depreciation concerns – vehicle can be returned at the end of the contract
5. Option to buy – vehicle can either be bought or returned
6. Flexible contract period – from 2 to 4 years
7. Full choice of cars – all makes available
8. On balance sheet funding – shown as an asset on balance sheet
9. Maintenance option – contract can include maintenance if required
10. Rentals costed according to usage – based on predicted ‘miles per annum’ use

 

Finance Lease:

Suitable for all vehicles – low initial rental payment and monthly rentals – can have a ‘residual value’ rental or not as required – customer disposes of the vehicle at the end of the lease period 

1. Tax efficient – rentals allowable against corporation tax
2. Initial Vat savings – the funder reclaims all the vat and rentals based on the net vat cost
3. Subsequent Vat savings – vat charged on rentals is part or fully reclaimable
4. Depreciation concerns – customer is responsible for disposal of vehicle
5. On balance sheet funding – asset is shown in accounts
6. Flexible contract – from 2 to 5 years
7. Maintenance option – can be provided by a separate contract
8. Possible ‘residual value rental’ – lease can be fully paid over the contract term or have a final ‘balloon’ or ‘residual value rental’ to reduce the monthly rentals
9. No mileage restriction – rentals are not costed according to proposed usage

Lease Purchase:

Suitable for all vehicles – a variation of Hire Purchase, that normally has a ‘residual value rental’ built into the agreement - small initial rental payment and subsequent low monthly rentals

1. Tax advantageous on higher value cars – above approximate £25,000 list price
2. No vat savings – no one is able to reclaim vat included in the price of the car
3. No vat charged on rentals – as this is a ‘purchase’ option, no vat is payable on rentals
4. Depreciation concerns – customer is responsible for disposal of vehicle
5. On balance sheet funding – asset is shown in accounts
6. Flexible contract – from 2 to 5 years
7. Maintenance option – can be provided by a separate contract
8. Residual value rental – it is normal to have a ‘balloon’ or ‘residual value rental’ written into the contract to reduce the monthly rentals
9. No mileage restriction – rentals are not costed according to proposed usage

Hire Purchase Flat Rate:

Suitable for all vehicles – ownership passes to the customer at the end of the contract –fixed interest rate - usually a larger deposit and higher monthly rentals than Lease Purchase

1. Interest calculation – interest charged on a ‘fixed rate’ basis and rentals fixed for the contract period
2. Tax advantageous on higher value cars – above approximate £25,000 list price
3. No vat savings – no one is able to reclaim vat included in the price of the car
4. No vat charged on rentals – as this is a ‘purchase’ option, no vat is payable on rentals
5. Depreciation concerns – customer is responsible for disposal of vehicle
6. On balance sheet funding – asset is shown in accounts
7. Flexible contract – from 2 to 5 years
8. Maintenance option – can be provided by a separate contract
9. No mileage restriction – rentals are not costed according to proposed usage

Hire Purchase Variable Rate:

Suitable for higher value vehicles – ownership passes to the customer at the end of the contract – usually a larger deposit than Lease Purchase – may have a ‘residual value rental’ at the end of the contract – variable rate of interest 

1. Interest calculation – variable rate linked to either a Bank Base rate or LIBOR – interest paid on the reducing capital balance or spread evenly by way of a ‘Balanced Payment Plan’ method
2. Low early termination charges – usually only 30 days interest + outstanding capital
3. Tax advantageous on higher value cars – above approximate £25,000 list price
4. No vat savings – no one is able to reclaim vat included in the price of the car
5. No vat charged on rentals – as this is a ‘purchase’ option, no vat is payable on rentals
6. Depreciation concerns – customer is responsible for disposal of vehicle
7. On balance sheet funding – asset is shown in accounts
8. Flexible contract – from 2 to 5 years
9. Maintenance option – can be provided by a separate contract
10. No mileage restriction – rentals are not costed according to proposed usage