Vehicles can be one of the biggest expenses and risks in a business but, help is on hand through TysonCooper. We have made it a little easier to understand the business side of financing vehicles.
Business Contract Hire
Business contract hire allows a company the use of a vehicle for business purposes in exchange for a monthly payment. This is a common way for businesses to obtain new vehicles. It avoids having to fully invest in owning the vehicle outright and seeing its value depreciate dramatically in a short period of time.
With many business vehicle lease agreements, you will need to put down an initial deposit to secure the agreement. This usually amounts to a total of three-monthly payments but can vary depending on the terms of your agreement.
- Removes most of the risk of operating company cars for businesses
- With a fixed monthly cost, you know your financial outgoings
- There is usually not an option for the company to purchase the vehicle at the end of the contract. It is usually returned to the leasing company. Although the driver may have an option to acquire the vehicle at market value.
- It is a VAT efficient way of operating a company car.
- The monthly rental includes; the cost of the car, vehicle registration fees, road tax, mileage and funding costs.
What does a deal look like?
The minimum initial rental on a business contract hire deal is can be anything from three monthly payments upfront to nine upfront payments. The deals are usually over two, three or four-year periods and are advertised as 3+23, 3+35 or 3+47.
Business contract hire rentals are subject to VAT and if there is no private use of the vehicle then 100% of the VAT can be claimed back. If there is private use, then 50% of the VAT can be claimed back.
Finance lease is a method of financing vehicles, this means the vehicle remains the property of the finance company that hires it out and you pay for the hire of the vehicle.
The finance company charges a monthly payment as their reward for hiring the vehicle out to you. The finance company retains full ownership of the vehicle, but you get exclusive use of the vehicle (subject to meeting the terms of the lease).
A finance lease transfers substantially all the risks and rewards of ownership of the vehicle to the you. Using a finance lease means that the vehicle will appear on the lessee’s balance sheet, with outstanding rentals represented as a liability.
At the end of the finance lease agreement the rentals write the vehicle down to zero or to a balloon payment (this is an estimated value of the vehicle at the end of the agreement).
Want to know more? Contact us on 01473 372020 or email us at email@example.com. Click here to see the latest business deals.