Leasing Options – AutoInfusion Bristol

Leasing Options

There are a variety of ways that you can fund your new car. Business Contract Hire or Personal Contract Hire are the most popular and in most cases the only options available. However there are other options available.

Contract Hire is ideal for companies and private individuals who don’t want the financial risk of running their own vehicles. You hire a vehicle for an agreed period at a fixed monthly cost, the contract hire company retains ownership of the vehicle and at the end of the contract the vehicle is simply returned. The contract hire company take all the risks involved from interest rates to residual values, even the maintenance costs if the optional maintenance package is taken. In addition to the maintenance package you can include a full Breakdown and Recovery Service which includes home start and relay, and Relief Vehicles for use in the event of an accident or mechanical breakdown.

Key Benefits of Contract Hire

Off balance sheet funding

Vehicles on contract hire do not appear on your company?s balance sheet, the removal of capital assets from your balance sheet can enhance a company?s borrowing (gearing) ratio.

Vat Benefits

The VAT on the purchase price of the vehicle can be claimed back by the contract hire company, they pass these savings onto you in the form of lower monthly rentals. Once the vehicle is on the road you can claim back 50% of the VAT on the finance element (if the vehicle is available for personal use or 100% if only available for business use) and 100% of the VAT on the maintenance element of the rental payments.

Fixed monthly budgeting

Monthly repayments are fixed throughout the contract with initial deposits typically the equivalent of three months repayments, making budgeting much easier which in turn can improve your company?s cash flow.

Reduced financial risk and administration

Contract Hire removes the risks involved in running a company vehicle, from residual values.

Key Disadvantages of Contract Hire

  • Excess mileage charges apply if you over the contracted agreed mileage.
  • No option for ownership
  • The vehicle has to be returned in good condition. Damage beyond acceptable fair wear and tear is chargeable by the leasing company at the end of the contract.

Personal Contract Purchase is an extremely popular method of funding a new car favoured by individuals and drivers opting out of a company car scheme. It offers low fixed monthly repayments with a choice of flexible options at the end of the contract. Your cars future value is calculated based on your annual mileage and offset to the end of the contract by means of a guaranteed future value, at the end of the contract you then decide to either:-

  1. Buy the car by paying the agreed minimum future value
  2. Part-exchange the vehicle for another
  3. Pay the agreed minimum future value and sell the vehicle privately
  4. Or, subject to mileage and condition, return the car with nothing more to pay

PCP is ideal for drivers opting out of a company car scheme. You use your company car allowance to fund your PCP monthly payments without having to pay company car tax.

Key Benefits of Personal Contract Purchase

  • Low risk – As minimum future value is guaranteed
  • Low deposit
  • Low fixed monthly payments
  • Choice – Buy the car, part-exchange it or just return it
  • A better car – lower payments could mean you can choose a better car
  • No company car tax if opting out of a company car scheme
  • VAT free – payments do not attract VAT.

Disadvantages of PCP

  • Only available to personal users.
  • Payments can typically be higher than contract hire on alike for like basis.
  • If you return vehicle, excess mileage charges apply if you exceed the agreed contract mileage.

Lease Purchase is an agreement for private individuals and businesses where the customer has the option to own the vehicle at the end of the agreement. It is similar to a standard Hire Purchase agreement, but offers lower monthly repayments due to a proportion of the vehicles cost being deferred to the end of the agreement by means of a “balloon” payment. The balloon payment can be tailored to your exact requirements at the beginning of the agreement by using your anticipated contract mileage as a guide to the vehicles future value at the end of the contract. Fixed monthly repayments are made over an agreed period until the end of the contract where you will then have the option to pay the final balloon payment and keep the vehicle or part exchange the vehicle for a new one. The final balloon payment isn?t guaranteed which means that there will not be any unavoidable excess mileage charges at the end of the contract, should you exceed your expected contract mileage.

Key Benefits of Lease Purchase

  • Low initial deposit
  • Lower fixed monthly payments
  • A better vehicle – lower payments give you the option of a better vehicle
  • Vehicle ownership? Writing down allowances available for business users
  • VAT- payments do not attract VAT.

Disadvantages of Lease Purchase

  • No option to return the vehicle at the end of the agreement. The pre-agreed final payment has to be paid.

Finance Lease is a tax efficient way in which to fund vehicles, it has similar VAT and Corporation Tax benefits to Contract Hire, but the responsibility and risk for the resale of the vehicle at the end of the term remains with you.

There are two main types of Finance Lease, one where you pay the entire cost of the vehicle, including funding charges over an agreed period or you can choose a lower monthly repayment with a final balloon payment which is based on the anticipated future value of the vehicle at the end of the lease period. Monthly payments and funding rates are fixed throughout the agreement, giving you the benefits of fixed monthly costs. The responsibility for resale at the end of the contract is yours and as such any risk or reward associated with the sale remains with you.

Key Benefits of Finance Lease

  • Low Initial payments
  • Monthly rentals are fixed
  • Choice of a balloon payment to reduce monthly rentals
  • Rentals can usually be offset against taxable profits
  • Monthly rentals attract VAT.

Disadvantages of Finance Lease

  • On balance sheet funding
  • Only suitable for VAT registered businesses
  • No option to return the vehicle.
  • If taken with a balloon payment this must be paid at the end of the agreement.