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This traditional form of finance (HP) offers the hirer the opportunity to own the vehicle outright at the end of the hire purchase agreement.
Normally a deposit is required as an advance payment, however in the case of commercial vehicles the VAT due is possibly sufficient to cover this element.
Interest is payable on the outstanding balance and the period of the agreement.
In addition to these cost a document and option to purchase fee maybe required.
If you wish to reduce the monthly payments you could consider a balloon final payment, this is where a percentage of the cost are deferred until the end of the contract. However, the balloon is due to be paid on the last day of the agreement, (secondary finance maybe possible on the balloon)
Summary
Low cost initial outlay
Fixed monthly payments
Payment not liable to VAT
Balloon deferred payment alternative
Eventual Outright ownership
Contract hire is an ideal product for companies who don’t want the financial risk of running their own cars and vans and who are looking to reduce the administration burden of buying, servicing and disposing of their vehicles.
Your company simply hires the vehicles from BCL for a pre-determined period at a fixed monthly rate. The hire company retains ownership of the vehicles – and the risk associated with them – and at the end of the contract they are returned to the hire company.
The key benefits of contract hire to the business user are:
Off balance sheet funding
Under contract hire your vehicles do not appear on your company’s balance sheet as they are owned by the hire company. The removal of capital assets from your balance sheet can enhance a company’s gearing (borrowing) ratio.
Fixed monthly cost
A fixed monthly payment is charged over the life of the contract and the initial up front payment is normally just three month’s rental. Fixed monthly cost makes budgeting much easier in turn more accurate and improves your company’s cash flow.
VAT Benefits
Contract hire has many VAT benefits in that the hire company can claim back the VAT on the purchase price of the new vehicle. That means they can pass on these benefits to our customers. Once the vehicle is on the road, you can then claim back 100% on the service element and 50% of the financial element of the rental cost. For commercial vehicles you can reclaim 100% of all parts of the rental.
Reducing your financial risks
Managing the risks involved in running a vehicle fleet is all important and that’s exactly what you can do when opting for contract hire. The hire company takes all the risks involved in everything from residual values and maintenance to interest rates. That you to pay the monthly contract hire cost, insure and fuel the vehicle.
Reducing Administrative Hassle.
As the contract hire company along with BCL are supplying the vehicle, servicing and disposing of your vehicles, administration for the fleet operator is kept to the bare minimum.
Summary
Finance lease in many ways is similar to contract hire; both are leases and again ideal as an alternative method of business finance.
The initial lease period is called a primary period and can be extended into a secondary period, it offers low initial outlay cost, variable payment plans and allows a company to reclaim VAT both on cars (50%) and commercial vehicles (100%).
If you choose to extend the contract to the secondary period the funder’s will normally only charge a small nominal sum per annum called a peppercorn rental
A balloon deferred payment can be used to reduce the monthly payments but is due on the last day of the agreement.
Disposal of the vehicle is the responsibility of the hirer and any sale proceeds must be paid to the funder who will normally repay 95% of the proceeds as a rebate of rentals.
Summary
Low initial outlay
Variable payment patterns
Reclaimable VAT
Balloon Alternative
What is Contract Purchase?
This method of funding is ideal for companies who cannot fully reclaim VAT and is particularly suitable for financing the more expensive cars on the fleet It was introduced to alleviate the burden of companies who were unable to reclaim the VAT on their monthly payments, and to overcome the cost of the Corporation Tax implications for cars costing more than £12,000.
The big difference between Contract Purchase and Contract Hire is that you have the opportunity to buy the vehicle at the end of the contract period. You will be faced with paying a 'balloon payment' at the end of the contract which makes you the legal owner of the vehicle or alternatively you can return the vehicle to Lex.
If your company is restricted in the amount of VAT it is able to reclaim, or you have several expensive (typically in excess of £25k)* cars in your fleet, it may make financial sense to retain ownership of your vehicles. This, however, exposes your business to all of the risks inherent in administering, maintaining and particularly disposing Contract Purchase offers all the operational, managerial and administrative benefits of Contract Hire, together with the tax-efficient benefits of ownership, such as the ability to claim capital allowances
Your company enters into a finance agreement for the vehicle for a pre-determined period at a fixed monthly rate.
You have the option to buy the vehicle when the contract is up by making a final 'balloon' payment, agreed at the start of the term. Alternatively you can return the vehicle to us, sharing in any sales profits but with nothing further to pay should we sell the vehicle for less than the balloon payment. The single, fixed monthly payment takes into account the cost of the car, its rate of depreciation, the length of the contract, mileage and any additional services you may wish to build in. The majority of our customers choose to include maintenance cover, with full RAC breakdown and recovery service, keeping their drivers on the road without involving the company in complex or costly administration
PCP is the flexible finance option for individuals, giving you more car for your money from a wider choice.
Whatever the car you've had your eye on, you'll be able to see yourself in the driving seat with a PCP. It's a new and innovative way to finance the car you want, which allows you to drive a new or nearly new car, for a set period of time, doing an agreed number of miles. Unlike many other plans, a PCP offers trouble-free motoring to suit your needs - it's all about choice. More car for your money... With traditional methods of purchasing a car such as a loan, your payments have to fund the entire cost of the vehicle. As monthly payments with a PCP are based on only part of the price of the car for the period of the agreement, they are lower than you might expect. As a result your money will go further. ...from a wider choice... BCL will source any available make or model of new car you want from super-minis to executive saloons or 4x4's to convertibles. And you're not just limited to new cars, you can choose from our selection of 4000 nearly new vehicles. The choice is very definitely yours. ...with flexible finance... Choose the options to suit your needs and budget with 2,3,4 or 5 year agreements. All agreements include road tax for the entire term. Choose the amount of deposit you would like put down Choose to include our maintenance package including roadside assistance. Choose what to do at the end of the agreement. The flexibility of the Personal Contract plan means you can keep your car after a pre-agreed final payment or hand it back (subject to settlement of any outstanding excess mileage or damage charges). You may then start a new agreement for another car if you choose - whatever you decide, the level of commitment is always in your hands. All applicants must be 18 or over.
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