Finance Options | Hinckley & Nuneaton | Research Garage

Finance Options

Business Contract Hire (BCH)

Business Contract Hire is a credit agreement between any trading business (sole trader, LLP, Ltd or PLC) and a finance company. The finance company owns the vehicle, and the leasee is essentially paying for the depreciation in value of the vehicle during the contract duration. Therefore to get the best lease prices possible, businesses should look to take out a contract on cars which hold their value well over time. There are many benefits for a business investing in contract hire compared to finance purchasing. If your company leases a vehicle on a contract hire basis, you will pay to rent the vehicle in monthly instalments for a contract of 24 to 60 months, for example. Once the contract is up, the vehicle is returned to the leasing provider, leaving them to worry about depreciation values and disposal of the car or van. Furthermore if you own a company this will show as an off balance sheet asset, which in turn could free up capital.

Personal Contract Hire (PCH)

Contract Hire is designed for people requiring fixed monthly rentals with no risk of depreciation. The rental charged can include a wide range of additional options.

Key features and benefits:

  • Low initial outlay – usually 3 or 6 months rentals in advance.
  • Fixed rentals for the full contract period based on a set annual mileage which you decide.
  • Contract periods between 12 to 60 months.
  • Vehicle Excise Duty (tax), along with breakdown cover are included in your monthly rentals.
  • Can include a maintenance package if requested.
  • No depreciation risk.
  • Rentals can be offset against taxable profits for maximum tax efficiency.
  • All of the VAT paid on rentals is recoverable for commercial vehicles.
  • At the end of the agreement, simply return your vehicle and pay no further charge (provided mileage is within agreed limit and the vehicle has only sustained normal wear and tear).

Hire Purchase (HP)

Traditional Hire Purchase is a favoured method of funding. It is designed to provide a fixed term funding with eventual ownership.

Key features and benefits:

  • Low initial outlay, usually 10% of the vehicle price.
  • Fixed monthly repayments.
  • No VAT on payments.
  • Vehicles are treated as an asset and will therefore appear on your balance sheet.
  • At the end of the agreement and all monies have be paid, you will own the vehicle.