Leasing Finance Explained by Chippenham Motor Company in Wiltshire
CMC Business Fleet and Leasing offer efficient customer-focused service for businesses of all sizes. Our large range of choice and flexible solutions mean that we can provide effective leasing services to all our customers, whether they are self-employed or operate a large company fleet. We provide impartial advice and guidance to ensure that you have all the information you need to come to the right decision, and offer extensive support to help you maintain your fleet once that decision is made.
Contract Hire
For companies looking to control costs, Contract Hire is the most effective option. Regular payments cover all motoring costs and associated risks. This includes road tax, asset depreciation and vehicle disposal. Tailored servicing/maintenance packages can also be specified to cover these costs as well.
Contract hire benefits include:
- An additional line of credit
- VAT reclamation, up to 50% on payments and 100% of maintenance package costs.
- Vehicles recorded in notes to Audited Accounts but not on the balance sheet.
- Clients can claim Hire Rental Tax allowances.
- Change your vehicle at the end of the term
Be aware that:
- Contracts can be costly if terminated early
- Cars may incur charges if returned in poor condition.
Personal Contract Hire
Personal Contract hire is similar to Contract Hire, but for private individuals rather than companies. It offers fixed-cost motoring outside of a company car scheme, with the same hassle-free benefits and freedom from the risks of depreciation and low residuals.
VAT is included in the monthly payments but cannot be reclaimed (unless they use the car for business purposes?). Like Contract Hire, maintenance/service packages can be included in the monthly payments.
Benefits:
- Hire new or used vehicles
- Includes road tax
- Can be specified with service packages
- Change your car at the end of the term
Personal Contract Purchase
Personal Contract Purchase best suits those who wish to own their car at the end of the term and want to control expenses. You choose the car, deposit, length of the contract and expected mileage, and in return you receive fixed costs and, at the end of the contract, the option to buy and keep the car. It is ideal for those who have opted out of company car schemes, allowing drivers to avoid high company car taxes.
Benefits:
- Small or non-existent initial deposit
- Low monthly payments due to the deferred balloon payment
- No unexpected disposal or balloon payment risks
- Fixed interest rates
- Fixed motoring costs
- The option to refinance the final payment
- The option to use the car as part exchange for a new contract
- Sell the car privately at the end of the contract and pocket any profit above the GFV.
Be aware:
- Terminating the contract early can be expensive
- If the vehicle is not in good condition when returned, you will be charged
- If you exceed the mileage allowance, you will be charged (unless you decide to purchase the car outright)
Contract Purchase
Contract Purchase resembled Contract Hire, but is better suited to companies which cannot fully reclaim VAT, and is useful for financing more expensive vehicles. At the end of the contract, there is an option to purchase the car outright with a balloon payment, or return the vehicle to the finance provider.
Contract Purchase offers the administrative and operational benefits of Contract hire with the benefits of ownership, as the writing down allowance can be claimed when the vehicle is first put into use.
Finance Lease
Finance Leasing allows companies to manage their own vehicles and record them as assets on their balance sheets. The company does not own the vehicle but takes responsibility for it. To pay, the company may:
- Pay for the cost of the vehicle plus interest over the agreed period
- Or reduce monthly payments by making a larger balloon payment at the end of the agreement.
Clients never take ownership of a Finance Leased vehicle. At the end of the contract, they may:
- Pay the balloon payment and continue using the vehicle for a nominal annual fee.
- Refinance for a further period
- Sell the vehicle to a third party. Chippenham will require a copy of the VAT sales invoice and X% of the sales proceeds.
Benefits:
- Company gains a further line of credit
- Low monthly costs and initial payment
- 50% VAT reclamation, 100% on commercial vehicles
- Assets show on balance sheet
- Equity kept in the vehicles through sales proceeds
Be aware:
- You are responsible for any loss as a result of the vehicle’s sale
- You cannot own the vehicle
Lease Purchase
Lease Purchase is ideal for those who wish to own a vehicle outright at the end of the lease. This defers the largest payments to the end of the contract, allowing companies to acquire the vehicles for a minimal outlay.
Benefits:
- Fixed low monthly payments
- Vehicle ownership after final payment
- All sales proceeds go to vehicle owner
- Vehicles show as assets on balance sheet
- Allows for tax write-down
- Deduct interest as a business expense
Be aware:
- The final payment may be more than the value of the vehicle, but the full amount must still be repaid.
Hire Purchase
Hire purchase allows businesses to take ownership of their vehicles over an extended period. This is advantageous when they cannot buy outright in one lump sum.
Benefits:
- Small deposits
- Fixed rate of interest
- Fixed monthly payments
- Outright vehicle ownership at the close of the contract
Be aware:
- This can limit your choice of vehicles
- The asset you pay to own will depreciate
- Payments are higher than other finance types.
CMC Business Fleet and Leasing offer efficient customer-focused service for businesses of all sizes. Our large range of choice and flexible solutions mean that we can provide effective leasing services to all our customers, whether they are self-employed or operate a large company fleet. We provide impartial advice and guidance to ensure that you have all the information you need to come to the right decision, and offer extensive support to help you maintain your fleet once that decision is made.