With low initial payments, no depreciation risk and VAT reclamation advantages, contract hire is the prime funding method for businesses running company cars, vans and trucks.
Car, Van & Truck Business Contract Purchase – Modified Hire Purchase
In simple terms, this is a modified form of Hire Purchase for the car, van or truck, where the customer agrees to a ‘balloon’ payment at the end of the contract. This is usually based on the estimated value of the car, van or truck at the end of the agreement. The balloon figure is notionally deducted from the invoiced purchase price of the vehicle. The remainder of the loan, plus all interest costs are used to calculate the monthly payments over the term. At the end of the agreement the customer can either return the car, van or truck to the finance company or purchase it for the balloon payment.
Car, Van & Truck Finance Lease – Similar to Contract Hire
A Finance Lease offers similar payment and VAT reclamation terms to Contract Car Hire. The car, van or truck remains the property of the finance company throughout the contract car hire period and can either be fully written down over the contract period or a ‘balloon’ payment can be agreed to prior to entering the contract. When the vehicle is sold or traded you would receive approximately 90% of the proceeds of the sale.
Car, Van & Truck Hire Purchase
This is the traditional method of spreading the cost of acquiring business assets such as cars, vans or trucks. The client pays an agreed initial deposit and repays the balance, together with charges by fixed monthly instalments, over a period of up to five years. With Car, van and truck hire purchase, all risks and reward of ownership remain with the customer and capital allowances are available.
Personal Contract Car Hire
Contract car hire may suit you if you have opted out of your company car scheme or if you are looking for fixed-cost motoring on a new car. A Personal Contract Car Hire (PCH) agreement offers the individual a fixed-cost finance alternative to purchasing a new car by traditional means.
These contract car hire agreements will include road fund licence (tax) for the contract hire duration and can include full maintenance. The monthly contract hire cost dependent on the type of vehicle, length of contract hire period, contract hire mileage and whether or not maintenance is included in the contract hire agreement.
The initial payment for a contract hire car is usually equivalent to three monthly payments in month one, followed by single fixed monthly payments to the end of the contract term. Convenience is built into the contract car hire agreement. The contract hire car will be delivered to a mainland UK address of your choice and will be collected at the end of the contract hire period – all for no extra charge.
So, if you’re a private individual looking for a new car with a comfortable monthly payment and no expensive surprises and no risk on the residual value, Personal Contract Hire could be for you.
Personal Contract Car Purchase – Similar to Contract Car Hire
Taking a car on a Personal Contract Purchase (PCP) is similar to a Personal Contract Hire but provides several options. You have the choice of purchasing the car at the end of the agreement; returning it to the finance company, or using any excess over the agreed purchase price as a deposit on a further car.
As with the Personal Contract Car Hire, a maintenance option may be added and road fund licence (tax) is included with the monthly cost.
This detail courtesy of Planet Leasing, 645 London Road, Westcliff, Essex. Call Southend 410470.