| 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
|
