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