At UK Carline we have a range of finance options available to best suit the needs of you and your business. We understand the importance of getting a new vehicle, and we want to make this process as simple as possible.
Below, we have highlighted the key features and benefits of some of the finance products available. If you would like any more information, please phone us on 01995 641111, or you can Email us.
Business Contract Hire
Contract Hire is the most popular type of leasing, and is the ideal product if you want fixed cost motoring, and are confident about the mileage and condition your vehicle will be in over a set period of time. It is an easy and cost effective way of funding vehicles, enabling you to control one of your biggest business expenses. The vehicle is hired for a set period of time with a pre-determined mileage for a fixed monthly cost. At the end of the contract the finance company will collect and dispose of the vehicle. Maintenance can be included in your monthly rentals, usually at an additional cost. Monthly rentals will depend on the value of the vehicle, length of the contract, and the agreed mileage.
Business Contract Hire would suit customers who know exactly how long they will need the vehicle for and the mileage they will be doing, and who want to avoid the risk of depreciation with a fixed monthly cost.
Advantages:
- Choice of contract period, typically between 2 and 4 years
- Free up capital: get a new vehicle without the up-front costs, freeing up money you can use elsewhere in your business
- The risk on vehicle depreciation is eliminated: simply return the vehicle back at the end of your contract
- Less administration: the finance company deals with all the buying, maintenance and selling issues
- The vehicle appears off "Balance Sheet" as it is owned by the leasing company
- Road Fund Licence is provided for the term of the contract
- Tax benefits: rentals are up to 100% allowable against corporation tax. Up to 100% of the VAT on maintenance charges can also be reclaimed.
Disadvantages:
- You will need to estimate the time and mileage for the use of the vehicle
- There is no option to purchase the vehicle
- Costs to terminate contracts early can be expensive
- If you go over the agreed mileage allowance, you will be charged excess mileage fees
- Vehicles must be returned in a well maintained condition in accordance to fair wear and tear
Business Finance Lease
Finance Lease gives you the benefits of ownership as you can take advantage of any equity build up in the vehicle through a leasing product which can have a low initial rental. VAT is only charged on the initial rental and following monthly rentals, not the cost of the vehicle.
The vehicle is hired at a fixed monthly rental with a balloon payment covering the estimated residual value of the vehicle at the end of the contract. You are responsible for disposing of the vehicle, and if the sale price is above the predetermined balloon payment then you will retain the equity (minus a small charge from the leasing company). If the sale price is less than the balloon payment, then you will be responsible to cover the shortfall. The final payment is calculated using the mileage which is expected to be done in the vehicle over the contract.
Finance Lease would suit customers who want multiple options at the end of the contract, who want to build up equity without taking ownership, and who do not want to be tied to a contract which penalises them for vehicle damage or excess mileage.
Advantages:
- Fixed monthly rentals
- Choice of contract period, typically between 2 and 4 years
- Monthly rentals are up to 100% tax deductible
- Potential to carry on using the vehicle at the end of the lease period
- Additional line of finance that may not affect core banking arrangements
- Monthly rentals can be lowered through the introduction of a final rental at the end of the contract. This can be set at a value of the equivalent to a forecasted residual value or reduced in line with anticipated wear and tear
- Available option to re-finance the balloon payment over a longer period of time
- No need to be VAT registered
- You retain the majority of any equity built up at the end of the contract
Disadvantages:
- Risk of fluctuations in the used vehicle market
- Monthly rentals appear as liability on finance sheet
- Maintenance costs cannot be included in rentals
Business Contract Purchase
Contract Purchase is an agreement to purchase a vehicle through a series of monthly instalments, and ownership will pass to you at the end of the contract following a final payment.
Thanks to a guaranteed residual value set by the finance company at the start of the contract, you have three options at the end:
- Part exchange and use any equity as an initial rental on your next vehicle
- Give the vehicle back to the leasing company (subject to mileage and condition)
- Keep the vehicle by paying the optional final instalment
Similar to Contract Hire, Contract Purchase enables you to make fixed monthly rentals, but with the option to retain the vehicle at the end of the contract. It is ideal for customers who want ownership without a large financial outlay and who want multiple options at the end of the contract.
Advantages:
- Fixed monthly payments
- Choice of contract period, typically between 2 and 4 years
- Purchase cost may be corporation tax deductible through capital allowances
- Interest elements of monthly payments may be corporation tax deductible
- Potential benefit from higher residual values
- Option to retain the vehicle at the end of the contract without any depreciation risk
- Road Fund Licence is provided for the full contract term
- Optional fixed-cost maintenance package
Disadvantages:
- Outstanding instalments & vehicle appear as a liability on balance sheet
- Not VAT efficient
Business Lease Purchase
With a Lease Purchase agreement, the vehicle is leased for a fixed monthly rental, with the option to purchase at the end of the agreement. The agreement requires an initial rental and a final payment - typically equivalent to the residual value of the vehicle at the end of the contract.
This would suit customers who want ownership of the vehicle without a large initial outlay and who are non-VAT registered.
Advantages:
- Ownership at the end of the contract
- Choice of contract period, typically between 2 and 4 years
- Capital cost can be written down, unless using an annual investment allowance
- Purchase cost may be corporation tax deductible through capital allowances
- Interest elements of monthly payments may be corporation tax deductible
- Can benefit from higher residual values
- Fixed interest
- Can budget effectively with final payment facility
- Monthly payments are not subject to VAT
- The vehicle is registered in your name care of the finance company
Disadvantages:
- Any outstanding payments appear as a liability on balance sheet
- Vehicle appears on balance sheet
- Not VAT efficient
- You are liable for the full value of the vehicle
- No option to return it at the end of the contract
- Full amount for the VAT on the purchase of an LCV must be paid upfront
Personal Contract Hire
Personal Contract Hire is perfect for a private individual who wants fixed costs and is confident about the mileage and condition of the vehicle over a set period of time. It enables you to control one of your biggest expenses. It is similar to Business Contract Hire, however you will not be able to recover any VAT or take advantage of any tax allowances.
It is ideal for customers who want a more expensive vehicle than their budget would normally allow, and want to avoid the risk of depreciation and maintenance costs (with optional maintenance extra).
Advantages:
- Low initial and monthly rentals: one of the most cost effective options if you need full use of a vehicle but don't require final ownership
- Allows you to change your vehicle more often
- Fixed cost motoring with the option to add fixed maintenance costs
- Access to fleet related discounts
- No depreciation risks
Disadvantages:
- You will need to accurately estimate the time and mileage for the use of the vehicle
- Potentially expensive to terminate the contract early
- You will be charged for any mileage over the agreed amount
- You must return the vehicle in a well maintained condition in line with fair wear and tear
- There is no option to own the vehicle at the end of the contract
- No potential benefit from equity build-up
Personal Contract Purchase
With Personal Contract Purchase you can choose the car, the initial deposit, how long you want the contract to run for, and the mileage you think you'll do. At the end of the contract you have the choice to either buy the car outright for an agreed lump sum, part exchange the car and use any equity built up as the initial rental on another new car, or give the vehicle back and walk away without owing anybody anything (subject to mileage and vehicle condition).
This is ideal for customers who want a more expensive vehicle than their budget would normally allow or who want multiple options available at the end of the contract.
Advantages:
- Access to fleet related discounts
- You have a guaranteed future value for the vehicle at the outset of the contract based on your predicted mileage
- You will benefit from any equity built up over and above the balloon payment
- You can hand the vehicle back at the end of the contract (subject to its mileage and condition)
- You have the option to take ownership of the vehicle at the end of the contract
Disadvantages:
- You are responsible for the servicing and maintenance of the vehicle
- The guaranteed future value is based on the predicted mileage of the vehicle, therefore if the vehicle has done more miles than expected there is a risk of negative equity
- If you settle the agreement too early there is a risk of negative equity
