Personal Vehicle Leasing Finance Options – the most frequently asked questions answered.

Personal Vehicle Leasing Finance Options – the most frequently asked questions answered.

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Personal Vehicle Leasing Finance Options – the most frequently asked questions answered.

We recently looked at the vehicle leasing options open to businesses. Today we’re taking a look at the options open for your own personal vehicle.

There are three main options and in this article we’re going to look at two of them Hire Purchase (HP) agreements and Personal Contract Hire (PCH). We will look at the third option in more detail in the next article – so please keep an eye out for that.

Hire Purchase Agreements

What are they?

Hire Purchase (HP) agreements let you place an initial amount and then fixed monthly payments to complete the purchase of a vehicle.

So will I own the car?

Yes, once all the payments are made, ownership of the vehicle transfers over to you.

What are the main benefits of this type of agreement?

A Hire Purchase agreement is an incredibly affordable way for you to own your own vehicle – particularly if you are looking to keep a vehicle over a longer period.

Owning the vehicle means you can do what you want with it once it becomes yours.

What are my obligations in looking after the vehicle?

Your responsibility for the vehicle is to make sure;

· It is fully insured

· The vehicle is well maintained and serviced and kept in a roadworthy condition.

· To keep up your monthly payments otherwise the vehicle could be repossessed.

What are the main considerations for a Hire Purchase agreement?

You would have to be committed to the vehicle as you will not be able to hand the vehicle back at the end of the agreement. Nor will you be able to sell the vehicle WHILST you are paying for it unless you made an early settlement.

Personal Contract Hire

With a Personal Contract Hire (PCH) Agreement, there are many similarities to Business Contract Hire that we discussed last week.

Will I own the vehicle?

No. The vehicle will not belong to you at any point during the agreement. At the end of the agreement you will hand the vehicle back.

How does the agreement work?

A PCH agreement is normally a 2-5 fixed term agreement with an initial rental and monthly rentals– including VAT thereafter

What are the benefits of a PCH agreement?

There are a number of benefits in choosing a Personal Contract Hire agreement. These include;

· You can choose the length of agreement to suit your needs.

· You may be able to reschedule the mileage limits in the agreement as required.

· You need not worry about depreciation or disposal values.

· You can include a Maintenance package if you choose

· You should benefit from funders buyer power

What are my obligations in looking after the vehicle?

As with a Personal Contract Purchase agreement – you must ensure the vehicle is;

· Fully insured

· Maintained and serviced.

· Any parking fines/congestion charges are paid.

Are there any additional charges I could be liable for?

As with the busines contract hire agreements where you hand a vehicle back, with a Personal Contract Hire agreement, you may face additional costs in relation to;

· Refurbishment to the condition of the vehicle.

· You may be charged additional mileage charges at a pence-per-mile if you exceed the mileage set-out in your agreement.

· Replacement of items which may be lost – e.g. spare keys, locking wheelnuts.

In conclusion

These 2 finance options are a large part of the reason why so many newer vehicles are on the road today. They make obtaining a new vehicle extremely affordable – and offer a great deal of flexibility.

There is also another option that I mentioned before, but it’s worth spending time on this option in it’s own right. There will be a post on this site about this next week – so make sure you sign-up below for updates.

In terms of whether Hire Purchase or Personal Contract Hire is best for you though, it really does come down to your own personal circumstances and needs.

If you have any questions about either of these options – or if you would like to discuss your options – please don’t hesitate to get in touch either using the form below, or in the comments on this post.

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Business Vehicle Finance Options – the benefits and suitability explained.

Business Vehicle Finance Options – the benefits and suitability explained.

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Business Vehicle Finance Options – the benefits and suitability explained.

Whether for your own use, or for the use for your business, there are lots of vehicle finance options available – each with their own benefits – which can sometimes make it confusing, leading to poor choices in the longer term. In this two-part article we will look at the different personal and business vehicle finance options available. We will put them into simple terms and explain the benefits for each – and the things to be mindful of too. In today’s article, we will look at the different finance options for business vehicles.

Business Vehicle Finance Options available

When it comes to using cars and vans for your business, there are several options available to you. Here we look at 5 of the main options and some of the commonly asked questions around these types of finance options.

1.   Hire Purchase

What is Hire Purchase? Normally, Hire Purchase is the first option most businesses go for. It is a cost-effective way of acquiring a new or used vehicle by making agreed instalment payments after making a down payment usually between 10-50%. Would I own the vehicle? Yes, but you only take over ownership of the vehicle upon completion of the agreement. When should Hire Purchase be considered? Hire Purchase is a great idea if you are looking to keep a vehicle long term or need to make specialist conversions to the vehicle. What are the main benefits of Hire Purchase Agreements? · Can be registered in the company name · It can appear on the balance sheet · Monthly payments not subject to VAT · No Mileage Restrictions When might a Hire Purchase Agreement not be suitable? Hire Purchase agreements mean you cannot sell or dispose of the vehicle until the payments are completed. You also cannot hand the vehicle back once payments are completed. What are my obligations in looking after the vehicle? Although you aren’t returning the vehicle, you need to make sure the vehicle is properly maintained and looked after. This means; · The vehicle has comprehensive insurance in place at all times. · The vehicle has to be serviced and maintained in accordance with the manufacturers warranty. · Failure to make payments could see the vehicles repossessed.

2.   Lease Purchase

What is a Lease Purchase Agreement? A Lease Purchase (LP) is very similar to a Hire Purchase agreement. The only real difference is that there is often a larger final payment (also known as a “Balloon” payment) which can provide lower monthly payments. However you need to be aware that this could give you a negative equity problem at the end of the contract. Would I own the vehicle? Yes, but only upon completion of all the payments. When could a Lease Purchase option be considered? Again, if you are looking to keep a vehicle for a long time, or wanting to incorporate specialist conversions. What are the main benefits of Lease Purchase Agreements? · No mileage restriction · Fixed monthly payments not subject to VAT · Vehicle is registered in company name · Initial payment/ deposit is smaller due to some being deferred until the end of the agreement What else do I need to consider with Lease Purchase Agreements? Like with Hire Purchase options, with a Lease Purchase, the vehicle has to be insured and has to be serviced and maintained. Again, you must keep up with payments, and if any are missed the vehicle could be repossessed.

3.   Outright Purchase

What are the benefits of purchasing a vehicle outright? You could of course by a vehicle outright in full with one payment and there are benefits in doing this as a business. The main benefit is that your business owns the car and so you can sell it if it is no longer required – recouping some of that initial outlay. You can also cut out paying interest on the vehicle that you would pay in monthly instalments. You are also not tied down to mileage restrictions or meeting conditions in the vehicles maintenance – although maintaining and servicing your vehicles is obviously a wise-move. What are the disadvantages of purchasing a vehicle outright? The obvious disadvantage is the initial outlay – especially if you need a few vehicles and the unknown value of depreciation. Then there are the running costs and overall responsibility of the vehicle in terms of maintenance and repairs. If you are purchasing a vehicle outright, then you need to make sure that it is for a long-term purchase. (NB on certain cars and with all Light Commercial Vehicles (LCV) when using any type of purchase you can claim capital allowance 100% 1st year allowance. We will be exploring this further in future articles looking financial options and tax.)

4.   Finance Lease

What are they? Finance Lease is a fixed term rental agreement often used for light commercial vehicles (LCVs). Would I own the vehicle? No. The vehicle remains the property of the finance company and you have use of the vehicle. Is there an initial fee? Yes – followed by monthly instalments and sometimes a larger final payment. What are the main benefits of Finance Lease? There are lots of benefits to a Finance Lease option. The main benefits include; · A low initial outlay and monthly instalments makes it a good option if you need to get multiple vehicles at the same time. · Optional larger final payment (Balloon Payment) to reduce monthly payments · Options of 2-5 years ·  Potential to share in any resale value of the vehicle ·  VAT on the rental is reclaimable 100% if LCV and 50% if Car What are the disadvantages of Finance Lease? You are responsible to pay any negative equity that may occur. What else do I need to consider? Like the other options, you are responsible for making sure the car is fully insured, maintained and serviced. If you do not keep up with instalments the vehicle can be repossessed by the finance company. Something else to consider is something called a peppercorn rental. This is normally a payment which equates to the cost of one monthly payment. Making this payment allows you to keep the vehicle for one more year. After that, you can either pay another peppercorn rental or pay the final balloon rental.

What Next?

If you have any questions about which financial options would be best for your business, then our experts are on-hand to help you find the best way forward. You can message us using the form below, or feel free to add a comment at the bottom of this page. In the next part of this article we will look at Personal Contract Hire – and what options are available for personal vehicle use.

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