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Finance Lease

What is Finance Lease?

Finance Lease is a rental agreement which enables businesses to lease a vehicle with 100% tax
efficiency. All rentals are offset against any turnover therefore reducing the amount of tax payable
year on year.

During an agreement, you become the ‘lessee’ with the finance lender becoming the ‘lessor’. The
‘lessor’ will purchase the asset and lend it to the ‘lessee’ during the lease term.

There are many bonuses to Finance Lease, this plan offers flexibility to customers who may not have
the funds to purchase a van or vans outright. It offers the luxury of fixed monthly payments, low up-
front costs and tax advantages for eligible companies.

The risks and rewards of the asset lie with you during the time of the agreement and once the rental
payments which cover the assets original cost are completed, the lessor will have recouped its
investment.

Once the contract has been fulfilled, the asset is either sold or a secondary lease period can be
agreed.

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At the end of the lease

What happens at the end of the primary finance lease period will vary and depends on the actual agreement but the following are possible options:

  • The lessee sells the asset to a third party, acting on behalf of the lessor
  • The asset is returned to the lessor to be sold
  • The customer enters into a secondary lease period

When the asset is sold, the customer may be given a rebate of rentals which equates to the majority of the sale proceeds (less the costs of disposal) as agreed in the lease contract.

If the asset is retained, the lease enters the secondary period. This may continue indefinitely and will come to an end when the lessor and lessee agree, or when the asset is sold.

The secondary rental may be much lower than the primary rental (a ‘peppercorn’ rental) or the lease may continue on a month by month basis at the same rental.

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Contract Hire

What is Contract Hire?

Contract Hire (CH) is one of the most popular ways of leasing a car or a commercial vehicle.

Its main difference with Personal Contract Hire agreements is that it applies to businesses, rather than private individuals.

At the start of the agreement, you pay a deposit – normally the equivalent of six, nine, or 12 monthly instalments – followed by a set payment each month.

The most common contracts are for 12, 24, 36 and 48 months, although others do exist.

As a general rule: the longer the agreement, the lower the monthly payments.

At the end of the term, the vehicle goes back to the finance company and any damage must be fixed or you may well be billed for the damage at a retail cost.

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What’s the difference between PCH and PCP?

PCH has some similarities with Personal Contract Purchase (PCP), another form of car finance.

With both PCH and PCP, you pay an initial sum followed by monthly payments.

But with PCH you’re only ever renting the vehicle, whereas with PCP you’re actually paying off the depreciation of the car.

The major difference, however, comes at the end of the agreement.

At the end of a PCH contract, you simply give the car back to the finance company.

With PCP, on the other hand, you’re given the option of taking ownership of the vehicle. You do this by paying what’s commonly known as a balloon payment.

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Hire Purchase

How does Hire Purchase work?

Customers put down an initial deposit and then make monthly payments for a fixed period – typically two to five years. At the end of which they become the legal owner of the vehicle, once all payments and fees have been paid.

The more deposit you put down on a Hire Purchase deal, the lower your monthly payments are and vice-versa. With Hire Purchase, it may also be possible to become owner of the car earlier than agreed by making a lump-sum payment for the remainder of the loan.

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What are the advantages of Hire Purchase?

Hire Purchase deals allow consumers/businesses to spread the cost of buying a vehicle rather than having to find all the cash upfront. The risk for a dealer or manufacturer in offering Hire Purchase is mitigated to some extent by the fact that they can repossess the vehicle if the borrower can no longer make their monthly repayments: because the loan is secured against the car, this means that interest rates can be lower and that people with poor credit records have a better chance of being able to sign up for such a deal.

Unlike with PCP deals, Hire Purchase does not require a large final payment to be made to become owner of the car. And Hire Purchase agreements do not tend to impose annual mileage restrictions in the way that PCP or leasing deals do.

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Universal Price Promise Guarantee
We guarantee to be the most competitive quote on the market.
Full Manufacturers Warranty
Full Manufacturers Warranty
Every vehicle comes with a full manufacturers warranty from date of registration.
Free UK Delivery
Free UK Delivery
We offer a fast and FREE UK delivery to your door.
Convenience
Convenience
We source your vehicle and finance it on your behalf through our nationwide network of partners.
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