PCP finance is a very popular way of paying for a new car. It is attractive because of the freedom of choice and flexibility.

Features and benefits:

  • Low initial payment allow for accurate monthly budgeting
  • Fixed monthly payments
  • You may be able to refinance the balloon payment
  • No depreciation concerns if you wish to walk away at the end
  • Maintenance and servicing can be included
  • Fixed balloon or guaranteed future value to purchase payment when you first take out the contract
  • Cost effective
  • Can be used to finance new or used vehicles

Things to be aware of:

  • You will have to make a decision at the end of the contract as to whether you wish to sell the vehicle, return it or Keep it - this is often seen as an advantage to most people.
  • You must have fully comprehensive vehicle insurance

Personal Contract Hire (PCH) involves private individuals paying an agreed monthly rental for the use of a vehicle. It is normally cheaper than financing a vehicle outright as you are effectively renting the vehicle and it does not belong to you. The contract is based on a fixed term and mileage and is handed back to the finance company once the contract period has ended.

Features and benefits:

  • Contract terms available between 24 and 60 months (subject to the age of the vehicle at the start of the contract)
  • Choose from any make or model of vehicle, new or nearly new
  • Usage of the vehicle is provided over the contract period. Payments can include routine servicing and necessary repair costs (excluding accident damage), as well as breakdown & recovery
  • Fixed monthly rentals allow for accurate monthly budgeting
  • Road Fund Licence is provided throughout the contract period
  • The end of contract process is easy; simply hand the vehicle back
  • No depreciation or disposal risk
  • You have the option of including maintenance in the finance package
  • You have the option of extending the contract at the end

Things to be aware of:

  • You bear the costs of any excess mileage
  • Vehicle must be returned in a well maintained condition
  • High fees for early settlement of the contract
  • You do not have the option of owning the vehicle

A 'Purchasing' style contract suitable for non-VAT registered companies who require eventual ownership of the vehicle.
This is a method of financing a purchase with the vehicle becoming the property of the lessee at the end of the period. The monthly payment is determined by the amount of deposit paid, the period of the contract and the sale price of the vehicle. There is usually an option to have a final balloon payment, thus reducing the monthly payments, and on payment of this balloon amount legal ownership passes to the user who can choose to keep or sell the vehicle.
The loan is secured against the vehicle. In the event of the vehicle being sold before the end of the agreement the user would still be required to pay the loan back in full.
The vehicle appears on the balance sheet and purchase can claim a capital allowance for its depreciation as an asset.
The interest elements of the lease purchase fee can be offset against taxable profits.

Features and benefits:

  • Choose from any make or model of vehicle, new or nearly new
  • Contract periods can be selected from between 24 months and 60 months, with or without a balloon payment at the end of the contract (subject to the age of the vehicle at the start of the contract).
  • There are no mileage restrictions.
  • The contract can be settled early
  • Fixed monthly rentals allow for accurate monthly budgeting
  • Title passes to the end user when all payments have been made including any balloon and the option to purchase fee
  • You retain 100% of any equity in the sale of the vehicle

Things to be aware of:

  • You bear all the running costs for the vehicle
  • The balloon payment must be paid for at the end of the contract
  • The vehicle is yours once you have paid the balloon payment. In some cases the balloon can be higher than the residual value
  • Dedicated funding product, which does not include maintenance or any other value added services
  • You must have fully comprehensive vehicle insurance

A contract for businesses and professionals with optional maintenance and a choice to return or buy at the end of the contract period.
The customer purchases a vehicle by monthly instalments covering the cost of the vehicle and an interest element. The monthly fee will include any charge for additional services such as maintenance. There is usually a final balloon payment and on payment of this legal ownership passes to the user and they can choose to keep or sell the vehicle. Alternatively the vehicle may be handed back to the finance company.
Ownership, for tax purposes, passes to the user on the day the contract is signed meaning that its cost can be written down on the balance sheet by claiming capital allowances.

Features and benefits:

  • Contract periods can be selected from between 24 months and 60 months, with or without a balloon payment at the end of the contract (subject to the age of the vehicle at the start of the contract)
  • Choose from any make or model of vehicle, new or nearly new
  • Road Fund Licence is provided throughout the contract period
  • Fixed monthly rentals allow for accurate monthly budgeting
  • You may be able to refinance the OFP
  • No depreciation concerns if you wish to walk away at the end
  • Maintenance and/or Breakdown & Recovery can be incorporated into the monthly payment
  • Fixed OFP when you first take the contract out
  • Cost effective
  • At the end of the contract the final payment is guaranteed, giving you the option to simply return the vehicle at no extra cost, assuming no more than the total contract mileage is covered
  • You also have the option to buy the vehicle at the end of the contract for the guaranteed final payment. You may wish to then sell the vehicle, thereby allowing you to benefit
  • from any equity in the sale

Things to be aware of:

  • You bear the cost of any excess mileage
  • You will have to make a decision at the end of the contract as to whether you wish to sell the vehicle, return it or keep it
  • You must have fully comprehensive vehicle insurance

A fixed term business contract which can incorporate maintenance for accurate monthly budgeting.
Contract Hire is a popular way of hiring a business vehicle, whereby a vehicle is hired to a company for a specified time and mileage, in return for an initial fee (typically equivalent to 3 monthly rentals) and a subsequent monthly charge.
This type of hire removes many of the risks associated with vehicle ownership, such as depreciation, servicing costs and vehicle depreciation on eventual sale.
A contract hire vehicle does not have to be shown as an asset on your balance sheet because it is owned by the leasing company. Some or all of the rental charge can be offset against taxable profits.

Features and benefits:

  • Contract periods can be selected from 24 months up to 60 months
  • Use of the vehicle is provided over the contract period. Payments can include routine servicing and necessary repair costs (excluding accident damage), as well as breakdown & recovery
  • Choose from any make or model of vehicle, new or nearly new, car or van up to 3.5t
  • This type of hire removes many of the risks associated with vehicle ownership, such as depreciation, servicing costs and vehicle depreciation on eventual sale
  • Fixed monthly rentals allow for accurate monthly budgeting
  • VAT on new and VAT qualifying cars is recovered by the finance company and this reclaim benefit is passed on to the customer via lower rentals
  • VAT is 100% reclaimable on the management element (ie maintenance) of the monthly rental
  • For cars, 50% of VAT is reclaimable on the vehicle rental assuming some private use, or 100% of VAT can be reclaimed if there is no private use
  • VAT is 100% reclaimable for commercial vehicles
  • You can increase contracted miles during the contract term
  • The end of contract process is easy; simply hand the vehicle back
  • There is an option to extend the contract

Things to be aware of:

  • You bear the costs of any excess mileage as a pence per mile charge when the contract is terminated
  • High fees for early settlement of the contract
  • Vehicle must be returned in a well maintained condition
  • You do not have the option of owning the vehicle

A flexible business contract which can be settled early.
With a finance lease you choose to pay either the entire cost of the vehicle including interest charges over an agreed lease period or opt to pay lower monthly rentals with a final payment based on the anticipated resale value of the vehicle. The user benefits with a fixed cost but does take on the administration and operating risks, such as unexpected maintenance repairs and losses in residual value.
At the end of the contract you can continue to operate the vehicle for a nominal fee. Ownership remains with the leasing company for the duration of the contract, but the car does appear on your balance sheet with the capital element of the outstanding rentals representing a liability. Some or all of the rental charge can be offset against taxable profits.

Features and benefits:

  • Choose from any make or model of vehicle (car or commercial), new or nearly new
  • There are no mileage restrictions
  • Contract periods can be selected from between 24 months and 60 months, with or without a balloon payment at the end of the contract (subject to the age of the vehicle at the start of the contract)
  • Fixed monthly rentals allow for accurate monthly budgeting
  • VAT Registered companies are eligible to reclaim 50% of the VAT on cars and 100% on commercial vehicles. This is only possible if the mileage was completely for business use and the vehicle has no private miles.
  • You retain 98% of any equity in the vehicle after paying the final residual/balloon payment (if applicable)
  • There is no early settlement penalty if you choose to end the contract early
  • No damage clause means you avoid damage recharges from the finance company at the end of the contract

Things to be aware of:

  • You do not have the option to own the vehicle as it must be sold to a third party as the end of the agreement
  • You bear all the running costs for the vehicle
  • You must have fully comprehensive vehicle insurance
  • Ownership of the vehicle remains with the leasing company for the duration of the contract.
  • There are various options available at the end of contract. There include refinance, sale, part exchange, providing flexibility at that time.
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