After paying an initial deposit the balance plus the interest is repaid by equal monthly installments for a fixed period of time – At the end of the agreement you (the hirer) become the owner of the car – VAT is not added to the repayments – If this facility is taken up through a business the car will be classed as asset and its value is shown on the Balance Sheet – The interest payable is tax deductible – For writing down purposes Hire Purchase is treated the same way as outright purchase.
Contract Purchase (PCP)
Treated very much like a Hire Purchase but with a Guaranteed Future Value (GFV) lump sum at the end of the agreed period -
A deposit followed by equal monthly payments then the following options apply:
1) Pay the GFV and keep the car. The car is now yours.
2) Part Exchange the vehicle. You either get the minimum value for the car (GFV) or more and if any surplus, this amount can be used as a deposit on your next vehicle.
3) Or, hand the car back to us and have no more to pay*.(*A pre-determined mileage is written in to the agreement. If this mileage is exceeded then a charge per mile applies and/or if any repairs are required).
A form of Hire Purchase but aimed at Business Users – It operates in exactly the same way as Hire Purchase but Lease Purchase allows more flexibility by offering the option of a *Balloon payment at the end of the payment period.
*Lump sum at the end which reduces the monthly payment. Interest is also payable on the Balloon payment.
If you have the money already and don’t require any finance – just send us the cheque!! – We are quite happy to sell to you direct outright – All we need is cleared funds before we deliver the vehicle to you.
Very similar to a Finance Lease – The Vat benefits are the same – The difference is: at the end of the contract you hand the vehicle back to us (A pre-determined mileage per annum is agreed at the outset and a charge per mile will be made of any mileage excess.)
With a Finance Lease you (the lessee) do not become the owner of the vehicle – VAT is payable on the initial rental and all the subsequent rentals including (if applicable) the lump sum at the end – If you are Vat registered the Vat can be reclaimed (Car – 50% of the Vat reclaimable if vehicle used for private purposes as well as business purposes; Van – 100% of the Vat reclaimable ) – The unclaimed Vat and the rental can be offset against the taxable profits of your company – There is a limit on the amount of the rental that can be offset on cars. With cars up to a value of £12,000 the full 100% can be offset. Over£12,000 then a percentage is used. Vans 100% can be offset (no value limit) – At the end of the lease the vehicle is sold to a third party and the proceeds less 5% (as a general rule) are retained by you – Vehicles funded through a Finance Lease appear on the balance sheet.
Please contact us today on 01925 212318 if you require more information. We will be more than happy to run through the facilities that could be made available to you.
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