As with Contract Hire a proportion of the rentals paid can be offset against taxable profits. In terms of businesses, while the ownership of the vehicle remains with the leasing company for the period of the contract, the vehicle does actually appear on the company's balance sheet. The final deferred rental would be based on the anticipated, projected resale value of the vehicle. Option 2: Offset an amount to the end of the term with the result being that you would benefit from lower monthly repayments. Option 1: You can spread the total cost of the vehicle, which includes interest charges over a certain period leaving no further money to be paid The flexibility comes from the ability to choose between two options: As with PCH/Contract Hire this way of funding is more suited to a business customer. BCHĪ Finance Lease is a tax efficient and flexible way of purchasing a car. For more information about the key benefits of PCH, visit our Personal Contract Hire Finance guide page.įind out more about how PCH works with our useful PCH finance guide. You don't need a big deposit and road tax is covered for the duration of your contract. PCH can be a cost-effective way to keep yourself in a new car. Once this comes to an end, the customer simply returns the vehicle.
Your financial or tax advisor should be able to advise you if this applies.Ī PCH agreement can run over one, two, three or four years. Contract hire is classified as an operating lease for current taxation purposes, therefore it is regarded differently to 'purchase' contracts so you may benefit from certain tax advantages. If you are a VAT registered business a proportion of the rentals may be tax deductible. It's common to pay three months up front as an initial deposit, which means the initial outlay isn't too big. This amount is calculated working on the value of the car at the end of the lease and you pay the difference. The amount you pay per month effectively covers the drop in your car's residual value. This payment plan, normally more suited to Business Users (but becoming more common for personal users via 'PCH') effectively allows you to 'hire' vehicles as opposed to owning them. For more information about HP, visit our Hire Purchase Funding Explained guide.
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If you're a high mileage driver or would like to keep your car for a longer period of time, Hire Purchase (HP) can work out more effective than say a PCP deal. Should your circumstances change you are able to settle the agreement either partially or in full, and your finance company will be happy to provide a figure for this at any time.
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Once all the payments due under the agreement have been made the title passes to you and you are free to keep or dispose of the vehicle as you see fit. The monthly payments are determined by the amount of deposit initially paid, the period of the contract and the overall price of the vehicle.Ī typical hire purchase option will consist of paying a low deposit amount (maybe 10% of the vehicle price), have no mileage restrictions and entitle you the customer to eventual ownership of the vehicle.Įssentially, the Hire Purchase funding option is best suited to those customers who want simplicity. Hire Purchase is perhaps the most traditional of funding methods. Renew - Part-exchange your car, and if there is any remaining equity after the final payment is taken care of, this is yours to use as deposit or take as cash-backįind out more about how PCP works with our useful PCP finance guide. If car prices fall substantially and you find you have negative equity you hand the car back with nothing to pay)
Return - Return the car with nothing more to pay, subject to mileage and condition. Retain - Buy the car by paying the optional final payment You have total control in deciding which of these choices suits you best. Your car's Guaranteed Future Value (optional final payment) is calculated (based on a pre-agreed annual mileage and your preferred change cycle) and is deferred as a final payment. It combines fixed monthly payments with exceptional flexibility at the end of the agreement. Personal Contract Purchase is a highly attractive and very popular way to own a new, nearly new or used car. Personal Contract Purchase How does PCP work: