Vehicle Finance Explanations
We can provide finance for all makes & models of car or light commercial vehicle (up to 3.5 tonne).
We can provide new or “nearly new” vehicles to businesses and private individuals assessing your requirements and gearing our funding methods towards your individual vehicle needs
What is Contract Hire
For – Limited Companies, PLC’s, Sole Traders and Partnerships Contract hire offers most of the benefits of ownership without the hassle. In essence, it is like hiring a car but over a longer period and is a very popular choice for VAT registered businesses as this is a VAT beneficial finance package; one regular payment covers all cost for an agreed period and mileage.
You pay a fixed amount every month for an agreed term which should usually cover the cost of the vehicle to an agreed mileage threshold; there is an excess mileage charge which is agreed at the start of the contract, charged at a pence per excess mile rate for every mile over the agreed contract mileage.
Vehicle Excise Duty (Road Fund License). is usually included but roadside rescue, maintenance and relief vehicle provision are options that can be added and charged to the rental payment.
You would normally pay a deposit equal to one or three months rentals – VAT are due on rentals and deposit, but may be partially or fully reclaimable depending on your circumstances.
The finance company is responsible for the disposal of the vehicle at the end of the contract and you do not have the right to purchase the vehicle, however you can extend the hire if you wish.
What is Personal Contract Hire (PCH)
For – Private individuals opting out of the company car scheme Personal contract hire is similar to business contract hire in most cases you can just add the VAT to Business contract hire prices – some finance house’s charge an additional doc fees for PCH (Underwriting for PCH is very strict & can takes up to 48 hour for approval)
What is Personal Contract Purchase (PCP)
For – Private Individuals, Sole Traders and Partnerships A fixed amount is paid every month for an agreed term and mileage. This type of contract is essentially a purchase agreement where the monthly payment is kept low by a Minimum Guaranteed Future Value (MGFV) set by the finance company.
At the end of the contract you will have three options:
Hand the vehicle back to the finance company (an excess mileage charge may be incurred if you have exceeded the stated mileage) and additional costs maybe charged if the condition of the vehicle does not reflect normal wear and tear.
Purchase the vehicle at the MGFV regardless of market value; at this point you would own the vehicle outright.
Part-ex or sell the vehicle. If the vehicle’s value exceeds the MGFV set at the beginning of the agreement you can usually use this amount towards a deposit on your next contract or sell the vehicle and anything over the MGFV is your to keep.
You can also incorporate maintenance & servicing in this rental.
The deposit required could be as little as £99.00 up to a maximum of 30% of the vehicles total invoice value. A high deposit could reduce the monthly rental cost significantly.
What is Finance Lease
For – Limited Companies, PLC’s, Sole Traders, and Partnerships Finance lease is ideal for VAT-registered companies who want to handle the administration of they’re vehicles and have the asset shown on balance sheet.
An alternative choice for high mileage users where the mileage & condition constraints of contract hire would prove unsuitable, this is especially so for most commercial vehicle users
This is a Vat-beneficial finance option where the hirer can choose to pay the entire cost over the agreed lease period, plus an interest charge (full payout lease), or pay lower monthly rentals during the lease period with a final payment based on the anticipated resale value of the vehicle (spread rental with a balloon).
Note: with a full payout lease there is no final balloon payment as this is incorporated in to the monthly payment, so you do not take the risk of a short fall at the end of the contract if the vehicle fail to meet the expected price.