Full Range of funding options

Benefits and drawbacks of Contract hire+ / -

For	Against
Pre-determined costs ‘smooth out’ cashflow	You never own the vehicle – you just have use of it
Capital or loan resources are freed for more important ventures	Some tax allowances can be disallowed for expensive cars
No purchasing or disposals ‘hassles’ – and constant mobility
There are tax advantages – you can claim VAT back on rentals
In most cases the vehicle will not be shown on your Balance Sheet
Lease rentals are allowable against corporation tax
No depreciation or operating cost risk

Leasing

Initial payments are low, usually only three months rental in advance and a wide range of tailor made plans are available. At the end of the lease period the vehicle is disposed of by the leasing company and you will be refunded with most, if not all of the sale proceeds. This refund provides an excellent opportunity to fund the deposit for a replacement vehicle. Other lease options include balloon leases where a final payment is made which usually recoverable from the sale of the vehicle.

Benefits and drawbacks of Leasing+ / -

For	Against
Fixed finance costs help planning ahead	With a lease agreement you do not own the vehicle
Initial payment requirements are low	Other costs must be budgeted for – servicing and repairs for example
A new ‘credit line’, for you and your business	You cannot purchase the vehicle directly at the end of the period
There are tax advantages – you can claim VAT back on rentals	The residual value risk is with the user
Lease rentals are allowable against corporation tax	Some tax allowances can be disallowed for expensive cars

Lease Purchase

A modern way of acquiring company vehicles with advantages over Hire Purchase. Initial payments are low and a wide range of tailor made plans are available to suit individual requirements. Unlike Hire Purchse you do not have to find the entire cost of the vehicle. You agree with the Finance Company an estimated value of the vehicle at the end of the period based on mileage covered and pay monthly on the basis of the difference between that figure and the new vehicle’s cost. The balance is payable at the end of the contract.

Benefits and drawbacks of Lease Purchase+ / -

For	Against
Fixed budgeted costs help planning ahead	Other costs – servicing and repairs – must be budgeted for
Initial payment requirements are low	You either have to keep the car or dispose of it yourself
A new ‘credit line’ for your business is established	The residual value risk is with the user (unless you have chosen a guaranteed buyback finance package)
You can purchase the vehicle at the end of the period
There are tax advantages. Full capital allowances (of up to a maximum of £3,000 p/a) and interest charges are allowable against corporation tax
Guaranteed buyback finance scheme available, covering final payment

Hire Purchase

A ‘traditional’ method of acquiring company vehicles and one which private individuals can also use. You agree to purchase the vehicle totally over a set period of time. You pay a deposit and the Finance Company then settle the balance with the supplier of the vehicle. Your agreement is with the Finance Company, and you pay your set monthly figure to them. We can advise on the best Finance Company to suit your needs.

Benefits and drawbacks of Hire Purchase+ / -

For	Against
Fixed outlay each month for the vehicle purchase	Other costs – services and repairs – must be budgeted for
You will eventually own the vehicle (which may be an asset or not!)	You either have to keep the vehicle or dispose of it yourself
The tax advantages are identical to lease purchase	The residual value risk is with the user
Different schemes available allow flexibility	The user may use up credit lines

Cash Purchase

A self-explanatory way of financing a new vehicle. The individual or business user pays for the new vehicles out of cash reserves or savings by negotiating with the vehicle supplier.

Benefits and drawbacks of Cash Purchase+ / -

For	Against
No monthly payments	Cash taken up in purchasing the vehicle could be invested or used more fruitfully
You own the vehicle immediately	You have to dispose of the vehicle yourself
It is an immediate asset	Other costs still have to be budgeted for – tax, repairs, servicing etc…
There are tax advantages and full capital allowances up to a maximum of £3,000 p/a