Funding Options | Lancashire & Wigan | Chorley Group
Description Advantages Disadvantages
Hire Purchase
  • The 'traditional' purchase option
  • Lump sum deposit (plus full VAT on LCVs)
  • Title passes to customer at the end
  • Simple
  • Eventual ownership
  • Asset on balance sheet
  • Inflexible
  • No VAT reclamation on cars
    (unless 100% business use)
  • Liability on balance sheet
Lease Purchase
  • 'Flexible' version of Hire Purchase
  • Optional Deferred Lump-sum (balloon)
  • Other characteristics as per Hire Purchase
  • Balloon reduces rental or shortens term
  • Asset of balance sheet
  • No VAT reclamation on cars
    (unless 100% business use)
  • Balloon must be settled on 'keep' the vehicle at the end of the contract
  • Liability on balance sheet
PCP
  • Similar to Lease Purchase with a balloon
  • Balloon (optional final) payment 'guaranteed'
  • Other characteristics as per Hire Purchase
  • Optional final payment - no disposal risk
  • Asset on balance sheet
  • Liability on balance sheet
Contract Hire
  • Simple way to pay for the use of a vehicle
  • Optional maintenance to help budgeting
  • VED included for full contract
  • No disposal risk (subject to condition and mileage)
  • Minimum cost for use of vehicle
  • Reduced hassle / admin
  • No disposal risk
  • Budgeting control (with maintenance)
  • VAT paid on rentals
  • 50% of VAT can be reclaimed on finance for cars (100% on maintenance)
  • Off balance sheet
  • No ownership option
  • Charges may apply if vehicle is in poor condition or has exceeded contract milage at the end of contract
  • Charges may apply in the event of the early termination of the agreement
Lease Hire/Finance Lease
  • Similar to Lease Purchase, but a 'lease'
  • Option balloon for flexibility
  • 'Secondary' contract period available
  • Can extend agreement for up to 5 years
  • Customer receives 100% of sales proceeds as 'rebate of rentals'
  • VAT paid on rentals - no large upfront VAT
  • 50% of VAT can be reclaimed on cars
  • End of contract flexibility - up to 5 years for only £50 + VAT per annum
  • On balance sheet
  • Not a purchase product (so acquisition does not qualify for Annual Investment Allowance)
  • Balloon must be paid before secondary contract period can be entered into
  • Liability on balance sheet