Finance Explained

Hire Purchase

Hire purchase is an excellent method of spreading the cost of a vehicle or asset if ownership is important to you, as you become the owner on payment of the final instalment. The vat due on the purchase price of the vehicle or asset is payable with your deposit. With certain lenders, we have the option to defer the vat deposit for up to 3 months, so vat registered customers can reclaim the vat and pay it with the first, second or third monthly instalment. For businesses, the vehicle or asset will appear on your balance sheet, and you may offset the interest element of the repayment against taxable profits, and claim writing down allowances. Repayments may be either fixed or variable for the length of the agreement, usually between 24 and 60 months.

Finance Lease

Finance lease is ideal for business customers who want to benefit from owning a vehicle or asset while maximising tax efficiencies and minimising the initial outlay. The monthly rentals can be offset against your taxable profits. Unlike hire purchase, you are only required to pay the vat on the initial rental (deposit) and not on the entire purchase price, however, the monthly repayments are subject to vat, but can be reclaimed by vat registered businesses. At the end of the lease, you may either sell the vehicle or asset and receive between 95% and 100 % of the proceeds from the sale. Alternatively you may keep the vehicle or asset but pay a nominal yearly rental (peppercorn rental) until you opt to sell the vehicle or asset.