CAR & VAN FINANCE METHODS
In 1980, just 5% of the UK's company cars were contract hired. Today the figure is over 40% and rising (* Fleet Week), which clearly demonstrates the popularity of, and need for, contract hire. Unsurprisingly, financial experts opt for contract hire for the numerous cost savings. They think of Considerable VAT benefits, Fixed Cost Budgeting, released working capital and higher brand vehicles for value monthly prices. These are just a few benefits worth mentioning. Businesses all over the UK come to realise that motor vehicles are generally a dangerous gamble when it come's to investing Capital. If your new to Contract Hire and you've been fortunate enough to see an offering that seems to good to be true, take our advise and seize the moment! Contract hire quite simply avoids depreciation issues and residual value downturns and whether you take a service option or not, it'll still reduce your administration commitment allowing you to focus on what you do best; running your business.
Trinity's View - Business Contract Hire Pro's
Pro's - Reduced initial Outlay, Affordable Monthly Rentals and no residual risk fear is enough to warrant this huge funding trend. Cons- Ensure that the vehicle selected is suitable for your needs. A downside of contract hire is that once the contract has begun, you cannot terminate it without being hit with heavy penalties/Fees. Also choose a 2yr term if possible, unless you have a fleet of vehicles that can be rotated, a three year hire is a long duration to be committed to. Personal Hirers beware! Keep the term short for as littler as possible. Also be mindful of the fact that the vehicle will be expected to be returned in a satisfactory condition, conducive with age and Contract Mileage. If the vehicle has been damaged due to negligence or Vandalism, have it repaired prior to return. This will ensure that you are in control of the costs! Don't let the Contract Hire Company bill you for the repair, It is likely to cost you more. See our Section on Return Conditions.
PERSONAL CONTRACT HIRE
Personal Contract Hire is ideal for individuals who
want to avoid the cost and hassle of buying,
servicing and then selling the vehicle. You enjoy
all the benefits of using the vehicle and the
leasing Company retain all the risks of owning it.
The benefits to you as an individual primarily focus
on easier budgeting as costs are
fixed and known from the start. You can also include
all maintenance costs and RAC breakdown recovery in
the fixed monthly rental, leaving only fuel and
insurance. Contract Hire essential enables Smoother cash flow, with only a small
initial payment of typically three month's rental,
and no final balloon payment; It frees up your time as
the Contract Hire Company handle all the
administration of supplying, servicing* and disposing
of your vehicle. Contracts can be tailored to your
needs and budget from the outset. They can also be
extended at any point should your requirements
change, this method of leasing also reduces financial risk for you as residual
values, interest rates and market adjustments are
the Funders responsibility.
Trinity's View - Personal Contract Hire Pro's and Cons
Pros - Personal Contract Hire often carries additional Manufacturer Leasing Support and stronger residual values, this helps to reduce the Monthly Rental to you the customer. It is also a dynamic funding tool for those looking to drive a new car for as little outlay as possible. Initially, Contract Hire facilities benefited business customers only, but due to the introduction of Car allowances to employees as an alternative to a Company Car, Leasing Companies have extended their Contract Hire services to the personal sector. At the end of the Hire period you have no residual risk as the car is returned to the Contract Hire Provider. All you need do to avoid return costs is look after the vehicle. Return condition expectations can be seen within our Guide Cons- Ensure that the vehicle selected is suitable for your needs. A downside of contract hire is that once the contract has begun, you cannot terminate it without being hit with heavy penalties/Fees. Also choose a 2yr term if possible, unless you have a fleet of vehicles that can be rotated, a three year hire is a long duration to be committed to. Personal Hirers beware! Keep the term short for as littler as possible. Also be mindful of the fact that the vehicle will be expected to be returned in a satisfactory condition, conducive with age and Contract Mileage. If the vehicle has been damaged due to negligence or Vandalism, have it repaired prior to return. This will ensure that you are in control of the costs! Don't let the Contract Hire Company bill you for the repair, It is likely to cost you more. See our Section on Return Conditions.
FINANCE LEASE - BUSINESS ONLY
Lease Hire has many of the benefits of Contract Hire without the perceived inflexibility. A typical Lease Hire customer : Has the benefits of ownership without being the real owner, Can offset the whole rental amount against taxable income, Have no mileage restriction, Monthly rentals are fixed but there Is flexibility through variable deposit options. In addition you may wish to offset a proportion of the vehicle cost as a final payment. This is usually referred to as a balloon payment calculated at the outset of your agreement as a percentage of the vehicle price. This could reduce your monthly rentals and have a positive effect on your cash flow. Your balance sheet is likely to show the value of any vehicle on a Finance Lease agreement as a fixed asset and any outstanding rentals as a liability. With low deposits, flexible repayment periods and fixed rental amounts you could control and improve your cash flow. At the end of your contract You have three options : You can return the vehicle and the funder will forward your share of the balance of proceeds to you once anything owed , including any sell-on expenses, have been settled. Acting as the Funders agent, you can sell the vehicle on their behalf and receive a share of the sale proceeds, assuming no balance is owed to them. Or, If you want to continue to use the vehicles you can pay a nominal fee (usually one months rental) and carry on driving for the whole of the following year. There are no mileage restrictions simply drive as much as you want.
Trinity's View - Finance lease Pro's and Cons
Pro's-This finance method is particularly well suited to Vans. Where you are traditionally required to advance THE vat element in addition to a deposit (on a Van) Finance lease allows you to spread the VAT cost over the period(By paying on the monthly's) It also allows Van users an alterative to the sensitivities of Contract Hire return conditions. If the van has taken a few knocks ere and there your not going to get heavy bills sent your way! Cons - One would have to take a Finance Lease with a balloon (Final Payment) to make it stack up against Contract Hire. The balloon /Final Payment is not guaranteed by the funder, should your proceeds not settle the Balloon at Lease end, then you'll be in to Negative Equity!
PERSONAL LEASE (PCP)- PERSONAL INDIVIDUALS
The Personal Lease, or other wise know as PCP( Personal Contract Plan) can be likened to a typical car finance scheme offered through a Car dealership. It allows the individual to acquire a car based on a Hire purchase agreement with a deferred final Residual Value/Payment. The positive element here, is that at the end of the lease, the Final value/Payment required is guaranteed by the fonder. So here's how it works! Negotiate a price on your chosen car, The Funder determines the future value and deducts this from the Car price. You then pay on the difference plus the interest over the period. Naturally because the Deferred amount has been taken off, your monthly's are going to be greatly reduced. At the end of the period, in one form or another the Final payment has to be paid. So here's your options 1) Hand the car back in and walk away. 2) Sell the car, pay off the funder and keep the difference. 3) Keep the car and pay back the Final payment!
Trinity's View - Personal Lease Pro's and Cons
Pro's - If your more cautious, want more control of your options, and don't mind paying more. This scheme maybe for you. Cons- Safe but can be expensive!
The information given above is for guidance only. Some of the material may be out of date or may in certain areas contain errors or omissions. Trinity Vehicle Management has applied it's own interpretation of the above schemes. Whilst our people are experienced in the field of funding, the information should not be relied upon solely when considering a purchase. We advise that you seek the assistance of an accountant/financial advisor, who can assess your particular finance needs and advise accordingly