Finance Options

Personal Contract Hire

Personal Contract Hire is an agreement for a fixed term from 24 – 60 months, depending on your needs, with a fixed mileage for the term, based on your expected use. From these specifications a monthly rental is calculated which remains unchanged throughout the contract. The monthly rental includes the cost of Road Fund License for the full term of the contract.

With contract hire there is no large deposit to pay at the beginning. And the vehicle is handed back to the finance company at the end of the contract. There is no final payment and no worry about disposing of the vehicle.

A full maintenance package can be included, again at a fixed price within your monthly payments, which will cover the costs of servicing, tyre replacement, major mechanically failure and any general repairs.

Contract hire does not include insurance or fuel costs.

If you exceed the fixed mileage there will be an excess mileage charge calculated in pence per mile. You will be advised of the excess mileage charge at quotation stage.

Business Contract Hire

Business Contract Hire is an agreement much like personal contract hire, however as a business you are able to recover a percentage of the VAT. If the vehicle is being used privately, you can claim 50% of the VAT on the monthly rental of the vehicle. If the vehicle is for business use only (e.g. used as a pool car) you are able to recover 100% of the VAT on the monthly rental.

If the list price of the vehicle is more than £12,000 the amount that can be allowed against tax is reduced.

If opting for a maintenance package, you can claim 100% of the VAT as this is a business expense.

Personal Contract Purchase

PCP is a flexible method of hiring a vehicle, over a fixed term with fixed mileage, providing the option to purchase the vehicle at the end of the contract. A deposit would be required at the beginning of the contract.

The monthly payment is calculated by taking the OTR price, minus the future estimate value of the vehicle, what you are left with is divided over the number of months you want to contract for, this is the fixed monthly payment. Road Fund License for the first year of the contract only is included.

At the end of the contract you can either, hand the vehicle back as you would with a hire agreement. Or you can choose to pay the final optional payment and take ownership of the vehicle for the pre-determined future estimated value.

The contract can include a full maintenance package, at a fixed price, within your monthly payments. This provide cover for the costs of servicing, tyre replacement, major mechanical failure and any general repairs.

Personal Contract does not include the cost of Road Fund License after the first year of the contract, insurance or fuel costs.

If you exceed the fixed mileage there will be an excess mileage charge calculated in pence per mile. You will be advised of the excess mileage charge at quotation stage.

Business Contract Purchase

BCP is a flexible method of hiring a vehicle, over a fixed term with fixed mileage, providing the option to purchase the vehicle at the end of the contract. A deposit would be required at the beginning of the contract.

The vehicle will be classed as an asset making Business Contract Purchase suitable for vehicles valued at over £12,000 as it avoids restricted tax recovery found on hire agreements.

Business Contract Purchase does not include the cost of Road Fund License after the first year of the contract, insurance or fuel costs.

If you exceed the fixed mileage there will be an excess mileage charge calculated in pence per mile. You will be advised of the excess mileage charge at quotation stage.

Finance Lease

Finance lease is a method of hiring a vehicle for VAT registered companies, providing a flexible rental agreement. Ownership of the vehicle remains with the finance company but you bear at least 90% of the residual risk or reward at the end of the contract.

For tax purposes, a finance lease is a contract where the car is on hire, there is no pre-planned option of owning the vehicle. The ownership always stays with the finance company. The agreement shows as a leased asset with a corresponding liability.

There are two options available with finance lease. The first is a Residual Value Lease, providing fixed monthly payments over the term with a final balloon payment at the end of the contract. The second is a Fully Amortised Lease with fixed monthly accounting for the full value of the vehicle over the whole contract.

Hire Purchase

Hire Purchase is a simply method of purchasing a vehicle. The monthly payments are calculated by the OTR price of the vehicle plus interest being divided equally over the number of months of the contract. At the end of the contract you own the vehicle.

From a business point of view, Hire Purchase is treated in the same way as outright purchase so can provide an advantage when purchasing a high valued vehicle. The VAT cannot be recovered unless the vehicle is being used for 100% business use.

You would be responsible for the risk of resale value, repairs and maintenance if opting for Hire purchase.

Lease Purchase

Lease purchase works in much the same way as Hire Purchase, the OTR price is spread of the months of the contract, however these monthly payments would be slightly less than with Hire Purchase as there would be a final payment at the end of the contract based on the pre-determined future estimated value of the vehicle. This is not an optional payment. At the end of the contract you would own the vehicle.

Lease purchase is treated the same as outright purchase and hire purchase and can provide the same advantage if purchasing a high valued vehicle. The VAT cannot be recovered unless the vehicle is used for 100% business use.

Responsibility for the risk of resale value, repairs and maintenance lies with you.