Contract Hire - Ideal for VAT registered businesses
Contract Hire is the rental of a vehicle at a fixed monthly amount for
an agreed set time and annual mileage. The monthly payment is determined by the cost of the vehicle, the term of
the agreement and mileage covered as well as depreciation. Maintenance packages are usually included with Contract
Hire, but are optional. Contract Hire is advantageous to VAT registered businesses &
companies as the rentals themselves carry VAT. 100% of this VAT can be reclaimed by the company if the vehicle is used
solely for business, and 50% if there is an element of private use. 100% of the VAT levied on maintenance can be reclaimed.
Personal
Contract Hire - As per Contract Hire
Tailored to private individuals not
registered for VAT. More information on the advantages of personal contract hire for private customers, when compared to outright purchase or finance
Personal Contract Purchase -
suitable for businesses and private individuals
This is a sale agreement,clients contract to purchase the vehicle over
a set period of time. The payments are based on time and mileage and can include full maintenance like contract hire. This
covers servicing, repairs depreciation and road fund licence. There is nomally a final payment refered to as the
balloon after which legal ownership passes to the user. Often clients do not make the final payment, opting instead
to return the vehicle in exchange for a new one. With this scheme the vehicle is purchased inclusive of VAT and repayments
do not carry VAT except for the maintenance, of which 100% is recoverable
Hire Purchase
Vehicle purchase over an agreed loan period, with fixed monthly payments.The client is the
owner but vehicle title does not change until the loan is repaid. Loan repayments do not carry VAT.
The capital cost can be written down for tax purposes on a reducing balance basis. Currently up to £3,000 capital allowances
are available against taxable profits per annum. The interest usually without limit is also allowable against tax. These allowances
may be restricted if there is an element of private use.
The following additional options are also available:
• Vehicle Maintenance
• GAP (Guaranteed Asset Protection) See Financial Terms
• Emergency breakdown cover
