A simple hiring agreement with the option of purchase at the end of the contract. The simplest form of finance.
Key Features

• Payment of Deposit which is negotiable (normally 10% of invoice price)
• The finance balance plus interest is repaid monthly

Key Personal Benefit

• Vehicle ownership
• Repayments over fixed period
• Fixed interest rates for duration of contract
• Flexible deposit (normally 10% of invoice price)

Key Business Benefits

• Payments not subject to VAT
• Interest may be offset against taxable profits
• Writing down allowances are claimabl
• Vehicle appears as an asset on the Balance Sheet
• Additional line of credit

Lease Purchase is effectively a Hire Purchase agreement with a final payment (or balloon rental) deferred until the agreement end. This has the effect of reducing monthly payments during the term of the agreement. Settlement of the final payment is the customer’s responsibility at the agreement end.

Finance Lease is a funding method for business users only that enables a vehicle to be hired within an agreed mileage and time period.
Key Features

• The vehicles projected residual value at the end of the lease period is determined.
• Monthly payments are based on the difference between this and the vehicles price at the start of the agreement, plus finance charges.
• There is no large capital outlay and Company benefits from reduced monthly payments.
• At the end of the lease period, the vehicle must be sold, at the responsibility of the lessee, to a third party with the lessee being responsible for any shortfall compared to the residual value but gaining from any disposal gain. The finance company may charge a small percentage fee of the disposal value as a charge.

Key Business Benefits

• Vehicle use without ownership
• Eliminates capital expenditure
• Improved cash flow with fixed monthly rentals paid from revenue income
• Reduced monthly rentals
• Optional maintenance available
• VAT reclaimable (50% of lease element and 100% of maintenance element)
• Off balance sheet finance
• Rentals allowable against taxable profits (proportionately)

Finance Lease (Final Payment or Balloon Rental)
Same as for Finance lease above with two exceptions Secondary period does not apply in Balloon Rental lease On disposal customer receives 100% of the net sales proceeds

Further Personal/Business Benefit
Reduced monthly rentals due to the Final Rental

Contract Hire is a form of lease that is available for businesses and, with many finance companies, private individuals too. It is effectively a long term vehicle rental with customers having a fixed rental cost each month within agreed time period and mileage parameters.
Key Features

• The vehicles projected residual value at the end of the contract is determined by the finance company.
• Monthly payments are based on the difference between this and the vehicles price at the start of the agreement, plus finance charges.
• There is no large outlay, deposit levels are typically 3 monthly rentals in advance.
• Customer benefits from fixed, simple to budget monthly payments.
• At the end of the contract, the vehicle is returned to the finance company with no disposal risks (subject to excess mileage and / or damage charges outside the fair wear and tear part of the agreement).

Key Benefits

• Vehicle use without ownership, eliminating large capital outlay
• Improved cash flow with fixed monthly rentals
• No vehicle disposal risk
• Affordable monthly rentals
• Optional maintenance package

Key Business Benefits

• VAT is reclaimable (50% of lease element and 100% of maintenance element)
• Off Balance Sheet Funding
• Rentals can be treated as a business expense

Personal Contract Purchase (PCP) is another form of Hire Purchase agreement. However, the monthly repayments are reduced in comparison to Hire Purchase by deferring a proportion of the price of the car purchased until the end of the agreement. This deferred amount is known as a Guaranteed Minimum Future Value (GMFV) and is based on the expected future value of the car at the agreement end based on projected depreciation levels set around an agreed annual mileage.  At the end of the PCP agreement you have three options, as follows:

• Pay the GMFV and keep the vehicle. You could consider refinancing this amount if required.
• Sell or Trade-in the car and use any excess value over and above the GMFV to put towards a deposit on your next car.
• Return the vehicle to the finance company and walk away with no further obligation, thus protecting yourself from further depreciation if the market value is less than the GMFV. The finance company does reserve the right to apply excess mileage and damage conditions.