Rawlinson Group - Business Finance
BUSINESS CONTRACT HIRE WITH MAINTENANCE
Contract Hire is the most common form of vehicle leasing and offers many benefits to businesses. It allows a company to take on cars or vans for a set period and pay a fixed monthly rental. The company taking out the Contract Hire agreement does not own the vehicle, reducing the financial risk to the business and easing the administrative process of buying, servicing and disposing of vehicles.
HOW CONTRACT HIRE WORKS
1. You pay the advanced rental ranging from 3 to 12 months upfront.
2. Fixed monthly rental for the duration of your contract.
3. At the end of your agreement, you simply return the vehicle back to us.*
*Subject to any excess mileage charges and damages which exceeds fair wear and tear.
BENEFITS OF CONTRACT HIRE FOR YOUR BUSINESS
Road Fund licence included.
Flexibility to increase your contract term and mileage.
Optional servicing, maintenance and tyre options brings all running costs into one package.
Reduced VAT paid by business, as monthly vehicle payments can be offset against taxable profits.
Vehicles on Contract Hire are classified as 'off balance sheet' and therefore has accounting benefits by improving the financial ratios for the business.
VAT registered businesses are able to claim 100% of the VAT back if the vehicle is used exclusively for business.
If vehicle used privately, 50% of the VAT can be reclaimed on the finance of the rental.
FINANCE LEASE
Finance Lease is a hire product which gives businesses the flexible option of retaining the vehicle (for a small annual fee) at the end of the agreement. However, the customer may also sell the vehicle to a third party once all the rental payments have been made. The customer retains 100% of the sales proceeds (paid as a rebate of rentals).
HOW FINANCE LEASE WORKS
1. You pay an advance rental followed by a fixed number of monthly rentals over an agreed contract period.
2. To help bring down your monthly rentals, and improve cash flow, you can choose to take an optional balloon payment. The payment of the balloon is made at the end of the primary contract period. We will need an expected annual mileage to help us with this calculation. VAT is paid on the monthly rentals whereas with a purchase finance option the customer would be required to pay the whole VAT up front.
3. At the end of the term there are two options. Even though you do not own the car, you can sell it on our behalf. You keep 100% of the sale proceeds, which you can then use as the advance rental for your next new vehicle. You may be able to offset this advance rental against your taxable profits*. Alternatively, once all the rentals and any balloon payment are paid, you can continue your contract with us by entering a secondary period of rental. You will pay a "peppercorn rental" of just £50 a year plus VAT. So, if your vehicle is still working hard for you, maybe with bespoke decals or fittings, you have the option to keep using it or replace it – the choice is yours!
BENEFITS OF FINANCE LEASE FOR YOUR BUSINESS
Fixed monthly rentals for ease of budgeting
Lump sum or number of rentals as an advance rental
Option to extend agreement into a 'secondary' contract period for a nominal annual fee of £50 plus VAT (peppercorn rental)
Option to include a deferred final 'balloon' payment to keep monthly costs low
Tax relief benefits the same as Contract Hire*
50% VAT usually reclaimable of cars*
100% VAT usually reclaimable on LCVs*
Reduced VAT paid by business, as monthly vehicle rentals can be offset against taxable profits*
*We always recommend you take independent financial advice to determine how your own business can benefit from the advantages offered by financing your company vehicles.
LEASE PURCHASE
Lease purchase is a flexible finance option similar to Hire purchase however, lease purchase allows for an optional deferred sum ('balloon') to be paid at the end of the agreement. This deferred sum can reduce your monthly payment or reduce your contract length.
HOW LEASE PURCHASE WORKS
1. You pay an initial deposit followed by a fixed number of monthly payments over an agreed contract period.
2. Monthly payments can be reduced by making a 'balloon' payment at the end of the agreement.
3. The amount of the balloon payment will be agreed on at the beginning of the contract.
BENEFITS OF LEASE PURCHASE FOR YOUR BUSINESS
Fixed monthly payments for ease of budgeting.
Monthly payments are not subject to VAT.
Option to include deferred sum (also known as the 'final balloon') allows flexibility whilst keeping monthly payment low.
There are no mileage restrictions, as you retain ownership of the vehicle.
Taxation benefit from writing down allowance.
LCVs acquired on Lease Purchase should be eligible for the Annual Investment Allowance.
LCVs acquired on Lease Purchase are required to pay VAT up front as a lump sum.