About Leasing
Contract Hire – Usership not ownership
Ideal for VAT registered self-employed people and companies of all types. A deposit is paid, usually this 1st payment will be the equivalent of 3 months rentals but can be as low as 1 months rental, followed by a set monthly fee for the full period of the contract. At the end of the agreement the car is handed back to the finance company who actually own the car and the customer can either walk away or start again with another vehicle. 50% of the VAT on the rentals can be reclaimed (this becomes 100% if the car is only used for business purposes) if the customer has taken a maintenance package to cover service and repairs etc., 100% of the VAT on this portion of the rental can be reclaimed.
Finance Lease - Usership not ownership
Like Contract hire but a future resale value is set (commonly known as ‘balloon payment’) and is paid to the finance company at the end of the contract. If you then sell the car for more than the balloon figure required by the finance company, you will have made a profit. If you sell the car for less than this final figure you will have made a loss. Finance Lease attracts VAT.
Personal Contract Purchase (PCP) - Ownership
Personal Contract Purchase (PCP) is one of the most flexible type of vehicle finance. The individual leases a vehicle for a set period at a fixed monthly charge. At the end of the contract, there is an optional balloon payment which can be paid to buy the vehicle otherwise you can choose to return the vehicle with nothing further to pay. The monthly charge is governed by the initial cost of the vehicle, the mileage covered, the period of the agreement and the estimated value of the vehicle at the end of the contract. In addition, features ranging from basic servicing to total vehicle management packages can be included if required. PCP being an alternative to Hire Purchase, the traditional method of financing, is covered by the protections as set out in the consumer credit act.
Hire Purchase / Lease Purchase - Ownership
Everyone is familiar with the traditional vehicle finance of Hire Purchase where title to the car passes to the customer upon the last payment to the finance company. Lease Purchase is very similar to Hire Purchase but has a deferred (balloon) payment at the end of the contract. Once the final balloon payment is made, the car is yours. This is a non-VAT product and there are no mileage penalties. This is an ideal funding option if a company is not VAT registered.
