Then you agree a monthly rental and contract period, which can include an acceptable final rental, often called a “Balloon” or “Terminal Rental”. This will have the effect of keeping your monthly rentals to a minimum.
There is also an option called a full payout Finance Lease, this is simply a Lease with NO “Balloon” or “Terminal Rental” payment at the contract end.
Another popular choice for VAT – registered and non VAT – registered companies that want minimum outlay and maximum control of costs, especially when the maintenance and relief vehicle options can be included. With this VAT – beneficial financing package, one regular rental payment covers all risks, including costs of depreciation and disposal, for an agreed period of time and mileage. Road Fund License is included, but roadside rescue, maintenance and relief vehicle provision are options that can be added and changed to the monthly rental.
If your company leases a vehicle on a contract hire basis, you will pay to rent the vehicle in monthly instalments for a contract of 24 or 48 months, for example. Once the contract is up, the vehicle is returned to the leasing provider, leaving them to worry about depreciation values and disposal of the car or van.
Contract hire means your company can concentrate on its core activities, while avoiding the financial risk and administrative burden of owning your vehicle or fleet.
Hire Purchase is a finance contract that hires a van to you for the term you agree, where upon completion of all the payments within the contract allows you to take ownership of the vehicle.
Hire Purchase does not allow you to defer any amount to a final lump sum payment. There are finance products available that allow you to do this, please ask for further details.
Finance rates for Hire Purchase varies from lender to lender, but once agreed the rate remains fixed for the agreed contract term.
Hire Purchase providers will expect the VAT element of the purchase price along with an agreed additional amount when purchasing a commercial vehicle. For cars the amount is simply a lump sum, this can vary from lender to lender but 10% of the purchase price is usually a fair guide.
Repayments can be spread over any number of months usually between the range of 24 to 60 months. More commonly contracts are written on either 24,36,48 or 60 months terms.
Hire Purchase providers charge fees for their services, this is normally referred to as an initial upfront fee that is generally payable with the deposit and an option to purchase fee, generally payable with the final payment.
Hire and Lease Purchase are accounted for as assets to your business therefore they appear on your balance sheet.