Car Leasing Blog

With diesel technology pushing the boundaries of the current car market ever further it’s no surprise that major manufacturers are releasing more and more models in high powered diesel guises. The benefits being found in all areas including fuel economy and taxation. So Audi’s recent release (apart from the R8 TDi ‘Le-Man’ style super car diesel) could find its way onto many driveways in the UK… the TT TDi Quattro!

The best way of answering this one is as follows:

The maintenance contract will usually cover anything that warranty and insurance dont, which can be catagorised into the following

• Routine Maintenance and Servicing
• Reasonable Replacement of Tyres due to wear and tear

And sometimes a form of fleet managment system. The common misconception among leasee’s is that the contract will continue to cover replacement tyres for punctures,etc. This is not the case. The maintenance company will normally allow for replacement tyres for every 15,000 miles or so throughout the contract.

We get asked this one all the time.

The official stance is this : should the vehicle require any work to return it to its origional state for sale, that work will be charged (at almost certainly an infalted rate) back to the leasee (you)

However, this only really applies to painted signwriting because nowadays stickers and magnetic livery are much more aesthetic than they used to be.

The general suggestion we make is to get either stickers or magnetics, not only can magnetics be reused (when you get a new one) but they can be quickly removed should you be carrying expensive tooling for the type of industry you are in (or the van may be dual use)

This is quite a difficult question to answer, nominally because there are different contracts available to companies in the uk, so for this article we will deal just with the most popular company car leasing option - Contract Hire

Contract Hire is essentially a hire contract similar to that you would get from any rental company, it just has a longer fixed term and fixed mileage.

First of all lets deal with the term element. The term can range from 3 months upto 5 years, but realisticly, the best deals are to be had over a 2 or 3 year period.

Mileage - always a sticking point for most businesses so let me answer the main queries first:

No you are not limited to 10,000 miles per annum. You choose the mileage up front (anything upto 70,000 miles per year) and then the rental is calculated accordingly.

No you will not pay £1 per mile excess mileage. And if you do - dont bloody sign the contract!! The avergae excess mileage rate is in the region of £0.04p - £0.12p per mile.

Off sheet accounting, is one of the prominent reasons why companies would opt for Contract Hire. Dont worry, you dont need to be an accountant to understand this, and I will keep it simple.

If you purchase an asset (such as a desk or car or building), the value of that asset is placed on the balance sheet of a company and depreciated annually by your acountant. As such you pay tax on this value placed. Not always good for alot of people. The benefit would be that your balance sheet looks better.

When you lease an asset, there is no entry in the balance sheet (because you dont own it) so the payment (or 90% of it in the case of Contract Hire) is the effectivley ‘lost’ in the profit and loss account (meaning no tax on the payment)

So basically, for cars you can ‘write off’ 90% of the payment against each monthly profit and loss account and for vans and commercial vehicles its 100%

VAT - Another handy one. Cars first:

50% of the VAT payable on a Contract Hire agreement can be reclaimed, positivley affecting cashflow (as you are only paying VAT on the payment instead of the whole vehicle).

On the maintenance element of the contract, 100% of the VAT can be reclaimed. Which is nice

Next vans and commercial vehicles.

100% of the VAT can be reclaimed on the van or commercial, and 100% on the maintenance as such.

Road Fund Licence - Is covered in a contract hire agreement throughout, you dont have to worry.

Initial Capital Outlay - Is usually restricted to the equivalent of 3 monthly payments, but in some cases (and multiple orders) can be reduced to monthly in advance.

There is my bried overview of contract hire for businesses, please,please,please do not hesitate to ask if you have any questions. I am more than willing to help

Take care for now.
 

Regardless of whether you are a business or an individual looking for a new car there are a many varied and cost effective ways of financing the vehicle that will be able to meet your needs…..below are some simple explanations of some of the more popular options. …..Contract HireContract Hire is the leasing of a vehicle, normally to a vat registered business or company, for a set time and mileage at a fixed monthly rental. The monthly rental is determined by the cost of the vehicle, the period and mileage covered as well as the resultant depreciation. Maintenance packages are often included within Contract Hire agreements, but are not obligatory. …..Sale and LeasebackSale & leaseback can be used when your company already owns its own vehicles. Your fleet of vehicles could be purchased at an agreed realistic market value and then leased back to you through the funding method of your choice. This method removes any residual value risk for your company and would enable a cash injection into your business thus increasing your working capital. …..Outright Purchase Price CheckFor many people the concept of buying a car outright is daunting not least because the future value of the car is so difficult to quantify. The added complication of maintaining the car and the costs associated with this may make it a less attractive option. However if you are in the position of having cash to purchase your chosen vehicle outright and feel comfortable with the concept of servicing, taxing and disposing of it then shopping around for the best deal is important. Make sure you barter hard as somewhere a dealership will want to sell a car to hit its ‘target’ and will be willing to sacrifice profitability. ….Personal Contract Hire Personal Contract Hire, as its name suggests, is essentially the same as Contract Hire but for private individuals. If you want fixed cost motoring, or have opted out of a company car scheme then Personal Contract Hire could provide you with hassle free motoring without the residual value risks associated with traditional ownership.VAT is built into the monthly payments, but is not reclaimable by private individuals. Maintenance packages are usually available so that you don’t get any nasty surprises. ….Hire PurchaseHire Purchase is the traditional method of financing a vehicle with the vehicle becoming the property of the lessee at the end of the period. The monthly payment is determined by the amount of deposit paid, the period of the contract and the sale price of the vehicle. ….Personal Contract Purchase
Personal Contract Purchase (PCP) is a method of funding where an individual leases a vehicle for a set period at a fixed monthly charge. At the end of the contract, there is an optional balloon payment which the individual can pay to buy the vehicle otherwise they can choose to return the vehicle with nothing further to pay. The monthly charge is governed by the initial cost of the vehicle, the mileage covered, the period of the agreement and the estimated value of the vehicle at the end of the contract. In addition, features ranging from basic servicing to total vehicle management packages can be included if required. PCP being an alternative to Hire Purchase, the traditional method of financing, is also covered by the protections as set out in the consumer credit act.