Hire Purchase is the most common way to purchase a vehicle in the private sector. After paying an initial deposit, usually a minimum of 10% depending on status, you then pay equal monthly payments over anything from a 1 to 5 year period.
The interest rate is fixed at the beginning of the agreement. This gives you the protection against increasing rates over the period. Therefore allowing you the benefit of easier budgeting. After the last monthly payment has been paid you become the official owner.
Hire Purchase Benefits at a glance:
Frequently Asked Questions:
1). Are there any penalties for terminating the hire purchase agreement early?
No, infact because you are settling early the finance company reduces the amount you pay back due to you borrowing the money over a shorter period.
2). Is there any V.A.T on the monthly payments?
No V.A.T is added to the payments.
3). Is there any benefit for a company to use this type of finance?
Yes, the interest on the payments is tax deductable. The vehicle is also classed as a company asset and therefore can be written down against your profits.
Lease Purchase is similar to straight Hire Purchase, it can used for private individuals or business users. Lease Purchase is not to be confused with leasing, it is the ideal method for Fleet funding if your company is not V.A.T registered or for any person looking to fund a prestige vehicle.
The rate is fixed at the beginning of the term allowing fixed budgeting regardless of how the rate fluctuates over the period. It can be tailor-made to your requirements and can free your general cash flow. After an initial deposit, regular monthly payments can be established over anything from a 1 to 4 year period. At the end of the term there is a final lump sum payment (balloon or residual) that is base on the anticipated value of the vehicle at the end of the agreement. You can either pay the residual leaving the ownership of the car to you, or you can part exchange the vehicle using the balance, after paying the balloon as a deposit on a new car.
Lease Purchase Benefits at a glance:
Frequently Asked Questions:
Is there V.A.T on the monthly payments?
No,there is V.A.T on the monthly payments.
Are there any benefits for a company that uses Lease Purchase as its finance method?
As with hire purchase, the interest on the monthly payments are tax deductable and as the vehicle can be seen as a company asset it can be written down against your profits. This is an ideal way to own an expensive vehicle especially if the car holds its value.
How much deposit do I need?
It depends on how much you want the monthly payments to be. Depending on your status it can be anything from 3 months and above. Remember the lower the deposit the higher the monthly payments.
Do I own the vehicle?
Yes the vehicle belongs to you at the end of the period.
Contract Hire is ideal for companies who do not wish to have the risk associated with running their own vehicles.All figures are subject to V.A.T of which 50% can be reclaimed or 100% if the vehicle is being used solely for business use. After paying the fixed costs the vehicle is just given back and a new vehicle is chosen. A maintenance agreement can also be included in the monthly costs consisting of servicing and road fund license and a choice of or all of the following;
All you have to do is insure the vehicle and fill it with fuel. With an initial investment as low as 3 months fleets can be managed easier as the costs are fixed for the term.
Contract Hire Benefits at a glance:
Leasing is another cost effective option, traditionally used by V.A.T registered businesses. Although you never actually own the vehicle, leasing provides flexible financing for a minimal outlay and still proves to have its tax advantages. The lease is usually over 2-4 year period depending on your yearly mileage. Payments are worked out on V.A.T exclusive figures. As with contract hire this V.A.T can be reclaimed at 100% for vehicles being used solely for business purposes or 50% if used for personal use. To ease cash flow a final lump sum payment (residual or balloon) can be added. The responsibility of disposing the vehicle is yours of which you retain 95% of the sales proceeds and return 5% to the leasing company. The sales proceeds kept by you do attract V.A.T. Alternatively, if you do not want to dispose of the vehicle at the end of the period, you can enter into a peppercorn rental, which allows you to keep the vehicle for an extended period. During the lease term the vehicle is classified as an asset and can therefore be offset against taxable profit.
Lease Benefits at a glance:
Frequently Asked Questions:
Can we help dispose the vehicle?
We as brokers have no limit to what we can do and will dispose of the vehicle into the trade gaining maximum profits for your company.
This relatively new product is very similar to a Lease Purchase. However, the Final Lump Sum Payment (balloon or residual) is guaranteed. What this means to you is that at the end of the 1, 2 or 3 year agreement the finance company will take the vehicle back off you at the amount of the balloon set at the beginning of the agreement. This offers you a protection against any losses on the value of the vehicle over the term. Using a P.C.P agreement gives you 3 choices at the end of the period.
1. Pay the outstanding balance and keep the vehicle.
2. Part exchange the vehicle and use the remainder of the money after paying the balance to put down as a deposit on your new car.
3. Hand the vehicle back and walk away.
With this type of finance you can add a maintenance agreement which for an added cost will cover you for servicing and fair wear and tear on tyres and exhausts.
P.C.P Benefits at a glance:
1. Budgeting is made easier due to fixed monthly payments.
2. As a large percentage of the balance is deferred until the end of the agreement, monthly payments are considerably reduced.
3. The agreement is not subject to V.A.T.
4. As the vehicle is an asset on your balance sheet you can claim a write down allowance against it.
5. Guaranteed residual gives complete ‘piece of mind’ when investment.
Frequently Asked Questions:
What happens if I go over my contract mileage?
There is usually a pence per mile clause which is paid at the end of the agreement.
Is insurance included in the maintenance costs?
No. Insurance is individual to the car and its user and so is dealt with by the insurance companies and brokers.
How much deposit will I need?
Depending on your status, anything from 3 months and above. The lower the deposit the higher the monthly payments.We as brokers have no limit to what we can do and will dispose of the vehicle into the trade gaining maximum profits for your company.
For more information on any of our financial packages please contact us at:
Chancery Leasing
Unit 52c severn Bridge In Est
Caldicot
Monmouthshire
NP26 5PT
Tel: 01291 425800 Fax: 01291 424411
www.cvleasing.net
Note - Whilst Chancery Leasing has made every effort to ensure the accuracy of the information on this site, the information given on the site is subject to change, often without notice. It is for guidance only and no liability is accepted by Chancery Leasing for its accuracy or otherwise.