Automotive Financial Products & Services
CONTRACT HIRE*
Contract Hire is a vehicle finance method designed for maximum benefit for VAT registered customers. Up to 100% of VAT can be reclaimed provided there is no element of personal use involved, though 50% can still be reclaimed if personal use is required. The vehicle is hired for an agreed period of time, usually between 12 and 48 months, a initial deposit is paid and a fixed monthly rental is paid based on the annual mileage. Contract Hire can include full maintenance to cover routine servicing, tyres, road fund licence etc. or can be for the hire on its own. At the end of the contract the vehicle is simply returned to the finance company, (subject to terms and conditions) with no vehicle disposal, depreciation, risks or hassle to worry about. Up to 100% of rentals can be offset against taxable profits; minimum capital outlay is required improving cash flow and allowing for more accurate budgeting. The vehicle is off balance sheet; annual road fund licence and breakdown cover are included together with the manufacturers warranty and full ongoing support is provided. Contract hire is only available for new cars.
HIRE PURCHASE
A conventional and traditional method of funding a car over a period of months. Benefits clients who want to totally pay for the goods in a cost effective manner and enjoy the flexibility of being able to settle the agreement early. This is available to clients wishing to acquire new or pre-owned vehicles and in certain cases can be offered with a balloon or residual payment option. Contract terms range from 12 to 60 months. Monthly payments are not subject to VAT. Hire Purchase is ideally suited to private individuals
PERSONAL CONTRACT PURCHASE
Payment structure similar to Hire Purchase but with an agreed annual mileage. With the added benefit of having an ‘Optional Final Payment’ at the end of the agreement often referred to as a ‘Minimum Guaranteed Future Value’ or 'Balloon' which protects the hirer from negative equity at the end of contract. At the end of the agreement you can either hand the car back to the finance company, with nothing further to pay. Pay in full the Optional Final Payment and keep the car, or part exchange the car, any equity is rolled forward towards the deposit on your next car.
FINANCE LEASE*
Typically structured in the same way as Lease Purchase. With or without a balloon payment at the end of the term to have the effect of reducing the monthly installments. A percentage of VAT can be reclaimed on the monthly rentals depending on the usage of the car. Monthly payments are subject to VAT
BALANCED PAYMENTS
This financing package is treated in the same way as a HP structure, but with the difference being that while the monthly repayments remain fixed at what ever amount, the interest rate is variable .The interest is calculated daily using the Finance House Base Rate, (FHBR) if the rate has moved during the agreement term you either pay the difference or receive a credit .The rate is calculated at the end of each month by averaging the cost of three-month money in the interbank market over the previous eight weeks. The resulting figure is then rounded up to the next half point. The process is entirely arithmetical and contains no discretionary element. FHBR is calculated on the last Friday of each month and the resulting figure becomes effective from the first day of the following month. It is published daily in the financial press and remains unchanged until the calculation produces a different figure. This product is suitable for the purchase of luxury and high performance cars where the change cycle may be important to the client.
Comparison Table
| Contract Hire | Lease Purchase | Finance Lease | Personal Contract Purchase | Hire Purchase | |
| VAT recoverable on hire? | yes > | yes | yes > | yes | |
| VAT recovered by finance company on vehicle cost? | yes | yes | |||
| Fixed Budgeting? | yes | yes | yes | yes | yes |
| Low initial capital outlay? | yes | yes | yes | yes | yes |
| Improve cash flow? | yes | yes | yes | yes | yes |
| Fixed monthly cost? | yes | yes | yes | yes | yes |
| Capital allowances available? | yes | yes | |||
| Allowable against profits? | yes | yes | |||
| Ownership of vehicle? | yes | yes | yes | ||
| No depreciation risk? | yes | yes | |||
| No vehicle disposal risks? | yes | yes | |||
| Reduced Admin? | yes | yes | yes | yes | |
| Road Fund Licence Included? | yes | ||||
| Breakdown recovery? | yes | ||||
| Maintenance option available | yes | yes | |||
| VAT charged on maintenance? | yes | ||||
| VAT recoverable on maintenance? | yes |
> 50% of VAT recoverable if some private use; 100% if business use only
*Suitable for VAT registered business users