| In today's financial climate more and more | | | | maintenance costs(Full maintenance) |
| businesses and private individuals are moving | | | | |
| away from buying their vehicles with cash or | | | | * 50% of VAT is recoverable for VAT |
| a bank loan and looking at better | | | | registered businesses on monthly rentals & |
| alternatives, which are both more tax | | | | 100% on the service element if a full |
| efficient and cost effective. | | | | maintenance contract. |
| | | | |
| Contract Hire | | | | * Road fund licence included for entire |
| | | | contract. |
| One of the most popular schemes is contract | | | | |
| hire, which is now available to private | | | | * Percentage of the rentals allowable against |
| individuals via PCH(personal contract hire) | | | | tax(Business Users). |
| as well as the long established BCH(business | | | | |
| contract hire) for business users. In a nut | | | | Contract Purchase |
| shell these type of contracts allow you to | | | | |
| 'hire' the vehicle of your choice for a set | | | | This is an alternative type of contract that |
| period usually between 12 & 60 months, with a | | | | gives you similar benefits to contract hire |
| low initial rental (usually equivalent of 3 x | | | | but with the option to purchase your vehicle |
| the actual monthly rental)and at the end of | | | | at the end of the contract, this is called |
| the contract it is simply returned to the | | | | Contract Purchase and as before can be done |
| funder, with absolutely no residual burden | | | | through your business or personally for |
| for the user. | | | | private individuals. |
| | | | |
| Contract hire is much more affordable from a | | | | As with contract hire there is a low cost of |
| monthly payment point of view as you are not | | | | entry, usually a minimum deposit (3 x your |
| paying for the full price of the car over | | | | monthly payment) and typically you can take a |
| your agreed rental period, you simply pay for | | | | contract over a period from 12 to 60 months. |
| a percentage of the price, basically you pay | | | | At the point of negotiation of your contract |
| the (initial cost of vehicle) minus (the | | | | the funder informs you of what the GFV |
| funders estimated future residual value + | | | | (guaranteed future value) of your vehicle |
| Interest), therefore if your chosen vehicle | | | | will be, and that is a fixed value it cannot |
| has a strong residual then your monthly | | | | be changed by the funder at any point once |
| payments would be much cheaper than those of | | | | the contract is agreed.You can also as per |
| a car with a poor residual. | | | | contract hire choose to take your vehicle |
| | | | with full maintenance included for extra |
| In Layman's terms you could have an Audi or | | | | piece of mind and tighter budgetary control. |
| BMW for the same monthly rental as say a | | | | |
| Mondeo or Passat. With your contract hire | | | | But where it differs to contract hire is that |
| contract you can also choose to add full | | | | instead of the vehicle simply being collected |
| maintenance which means the cost of all | | | | from you by the funder at the end of |
| standard servicing, replacement tyres, | | | | contract, with contract purchase you have 3 |
| exhausts and batteries (due to fair wear & | | | | choices: |
| tear) are included, meaning that you have a | | | | |
| 'no-worries' contract where you can budget | | | | 1. You can choose to simply hand the vehicle |
| confidently for a vehicle for the full | | | | back to the funder without making the final |
| contract term in the knowledge that you wont | | | | payment(the GFV) and would be 100% free of |
| be getting any nasty surprise servicing | | | | any further penalties(unless you had gone |
| bills. | | | | over agreed contract mileage or damaged your |
| | | | vehicle) |
| So to sum up the main benefits of contract | | | | |
| hire to both business & personal clients are | | | | 2. You may decide you want to keep the |
| as follows: | | | | vehicle and you can choose to refinance over |
| | | | an extended period. |
| * Vehicle is shown off balance sheet(protects | | | | |
| gearing ratios) (Business Users) | | | | 3. Or finally you simply pay the final |
| | | | payment(GFV) and keep the vehicle so that you |
| * Accurate monthly budgeting | | | | could sell on privately or part exchange for |
| | | | another vehicle. |
| * Improved Cash flow(Low initial outlay) | | | | |
| | | | The other added benefit from a business |
| * Fixed monthly rentals unaffected by | | | | perspective is that the vehicle is seen as an |
| interest rate rises. | | | | asset on your accounts and therefore you are |
| | | | able to write down a proportion of its value |
| * Elimates all risk on residual values and | | | | against your profits. |