Finance and Leasing Products
Hire Purchase
Available to both Consumer and Business Customers. Hire Purchase is a very straightforward
repayment facility where you ultimately own the asset. For the business user the key benefits
are: ownership and control of the asset, potential for claiming writing down allowances against
taxable profits, interest elements of repayments can normally be offset against taxable profits,
the asset appears on your balance sheet and finally fixed or variable rate options. Cars are
treated separately to machinery and commercial vehicles.
Lease Purchase
As Hire Purchase, this is also a facility whereby you ultimately own the vehicle. It allows a degree
of flexibility whereby payments are structured, enabling low initial rentals to be taken and the
ability to set a final lump sum payment / balloon, at the end of the agreement. This makes the
interim payments much lower. The lump sum payment is the full responsibility of the customer.
Contract Purchase
As Lease Purchase but the contract has a mileage stipulation. A balloon payment is set at the
end of the agreement on the basis of the anticipated mileage. The advantage is that the Finance
House would take the risk on the balloon which is a benefit if the car is not worth as much as
that figure. Also, if you thought it was worth more and you wanted to keep the car, you would
normally have the option to pay the balloon and buy the vehicle from the Lender. The
disadvantage of these contracts is a lack of flexibility if you wish to terminate early and also
excess mileage charges if you exceed the contracted mileage. In addition, you pay increased
interest on the balloon element as it has been deferred from the outset.
Finance Lease
This is a rental agreement rather than a Purchase agreement. For this reason it is treated in a
completely different way by the Revenue. It is a popular way of funding a broad spectrum of
business assets. It offers all the practical benefits of ownership without many of the potential
burdens. Rentals can be offset against taxable profits (special rules apply to cars). Flexible rental
repayment structures gives you immediate use of the asset for a minimum outlay. Rentals are
calculated on the VAT exclusive price of the goods, VAT is paid on the rental payments, at the end
of the Primary period, if the goods are sold you will be refunded the majority of the sale price.
Operating Lease/Contract Hire
This is a rental agreement whereby the Lessor sets a balloon payment / residual value on the
vehicle, subject to your anticipated mileage. They rely on the resale of the vehicle or re-lease at
the end of the agreement to make their profit. You effectively have use of the vehicle and no risk
on the end value they have set. A service contract can be added to the rental to provide
complete ‘peace of mind’ in terms of the vehicle costs. This aids forward budgeting. It is a very
popular way of running large fleets.
Sale and Lease Back/Re-Finance
This is a way of generating funds for your business by releasing the equity you already have in
assets you own. Predominantly vehicles or machinery.
If the goods are already subject to a finance or lease agreement, you are still able to use them
to generate funds, provided there is sufficient equity in the goods after settling off the existing
finance agreement.
Please contact us for further information