Vehicle Funding Options
Business leasing options
The decisions you make will affect everything from the amount of risk your business takes on, to the size of your monthly leasing payments – they could also have an impact on your VAT and Corporation Tax bills, as well as your immediate cash flow. To help you decide on the best option for you, here’s a brief overview of some of the funding models available.
Business Contract Hire (BCH)
Contract Hire is one of the most popular methods of funding for small to medium sized businesses. It’s also one of the simplest. You hire the cars or vans you need for a fixed term, with a fixed mileage allowance, for a fixed monthly rental fee. You agree the term – normally between two and five years – and how many miles you expect the car to cover during this time.
(Your leasing provider will expect you to pay a fixed cost for every mile travelled beyond the agreed allowance, covering them for any additional ‘wear and tear’, and its potential impact on a vehicle’s resale value).
Why contract hire is so popular?
Contract Hire allows you to:
- Make predictable monthly payments
- Recover VAT costs (if you are a business)
- Include your maintenance costs
- Not worry about depreciation risk
Business Finance Lease (BFL)
A Finance Lease model also lets your company lease its cars and vans for a fixed monthly fee – but unlike Contract Hire, it also transfers the risk, and potential reward, of ownership to your business.
It comes in two distinct options, and which one you want will depend on your cash flow:
- Finance Lease (fully amortised) – your lease rental payments are based on the full costs of your vehicle, and aren’t adjusted for expected residual value.
- Finance Lease – your lease rentals are based on part of the cost of your vehicle, with a full balance offset until the end of the agreements – allowing for smaller rental payments along the way.
Business Contract Purchase (BCP)
Like Contract Hire, a contract purchase model can furnish your business with cars or vans for fixed monthly payments, for fixed terms, and with fixed mileage allowances. But you also get the option to purchase the vehicle when your agreed term is up. You should consider though, that you can't usually recover any VAT, only on service element or VAT invoiced up-front on commercial vehicle.
Business Lease Purchase (BLP)
Lease Purchase works for businesses, usually non-VAT registered, who want to own their vehicles but don’t want to pay an upfront cost. At the end of the term, you must make a final ‘installment payment’ (a lump sum settlement figure at the end of your contract) on the vehicle to complete the purchase. Maintenance isn’t included with this type of lease as it’s purely a funding product.
The decisions you make will affect everything from the amount of risk your business takes on, to the size of your monthly leasing payments – they could also have an impact on your VAT and Corporation Tax bills, as well as your immediate cash flow. To help you decide on the best option for you, here’s a brief overview of some of the funding models available.
Business Contract Hire (BCH)
Contract Hire is one of the most popular methods of funding for small to medium sized businesses. It’s also one of the simplest. You hire the cars or vans you need for a fixed term, with a fixed mileage allowance, for a fixed monthly rental fee. You agree the term – normally between two and five years – and how many miles you expect the car to cover during this time.
(Your leasing provider will expect you to pay a fixed cost for every mile travelled beyond the agreed allowance, covering them for any additional ‘wear and tear’, and its potential impact on a vehicle’s resale value).
Why contract hire is so popular?
Contract Hire allows you to:
- Make predictable monthly payments
- Recover VAT costs (if you are a business)
- Include your maintenance costs
- Not worry about depreciation risk
Business Finance Lease (BFL)
A Finance Lease model also lets your company lease its cars and vans for a fixed monthly fee – but unlike Contract Hire, it also transfers the risk, and potential reward, of ownership to your business.
It comes in two distinct options, and which one you want will depend on your cash flow:
- Finance Lease (fully amortised) – your lease rental payments are based on the full costs of your vehicle, and aren’t adjusted for expected residual value.
- Finance Lease – your lease rentals are based on part of the cost of your vehicle, with a full balance offset until the end of the agreements – allowing for smaller rental payments along the way.
Business Contract Purchase (BCP)
Like Contract Hire, a contract purchase model can furnish your business with cars or vans for fixed monthly payments, for fixed terms, and with fixed mileage allowances. But you also get the option to purchase the vehicle when your agreed term is up. You should consider though, that you can't usually recover any VAT, only on service element or VAT invoiced up-front on commercial vehicle.
Business Lease Purchase (BLP)
Lease Purchase works for businesses, usually non-VAT registered, who want to own their vehicles but don’t want to pay an upfront cost. At the end of the term, you must make a final ‘installment payment’ (a lump sum settlement figure at the end of your contract) on the vehicle to complete the purchase. Maintenance isn’t included with this type of lease as it’s purely a funding product.
Business leasing funding methods - Which one is right for me?
Download the table for more in-depth comparison of the business models mentioned above showing the different funding methods available. From the up front costs to who owns the vehicle when the lease is up, you’ll be able to compare the options and work out which is best for your business.
Download the table for more in-depth comparison of the business models mentioned above showing the different funding methods available. From the up front costs to who owns the vehicle when the lease is up, you’ll be able to compare the options and work out which is best for your business.
Leasing Options for Individuals
There’s no reason why vehicle finance should be complicated for individuals. If you’d like to learn more, we have explained the most common finance products below.
Personal Contract Hire (PCH)
This is probably the most popular leasing product for individuals looking for a regular payment and the chance to drive a new car every two to five years. Personal Contract Hire provides fixed monthly costs for the finance of the vehicle with the option to include extras such as servicing, maintenance and breakdown cover for even greater control of your budget.
With Personal Contract Hire, the leasing company takes on the risk of how much the vehicle will be worth at the end of the contract – meaning no unexpected surprises for you. At the end of the agreement the vehicle is handed back and an order for a brand new car can be placed. You do not have the option to buy the car at the end of the term.
Personal Contract Purchase (PCP)
This gives you many features similar to Personal Contract Hire, such as fixed monthly payments, but provides you with the option of owning the car at the end of the contract.
The expected value of the vehicle at the end of the contract is set based on how long you want to use it and your mileage over the period. This value is the amount you’ll have to pay at the end of the contract to take ownership. If you choose not to take ownership, the vehicle is handed back and another vehicle can be ordered.
There’s no reason why vehicle finance should be complicated for individuals. If you’d like to learn more, we have explained the most common finance products below.
Personal Contract Hire (PCH)
This is probably the most popular leasing product for individuals looking for a regular payment and the chance to drive a new car every two to five years. Personal Contract Hire provides fixed monthly costs for the finance of the vehicle with the option to include extras such as servicing, maintenance and breakdown cover for even greater control of your budget.
With Personal Contract Hire, the leasing company takes on the risk of how much the vehicle will be worth at the end of the contract – meaning no unexpected surprises for you. At the end of the agreement the vehicle is handed back and an order for a brand new car can be placed. You do not have the option to buy the car at the end of the term.
Personal Contract Purchase (PCP)
This gives you many features similar to Personal Contract Hire, such as fixed monthly payments, but provides you with the option of owning the car at the end of the contract.
The expected value of the vehicle at the end of the contract is set based on how long you want to use it and your mileage over the period. This value is the amount you’ll have to pay at the end of the contract to take ownership. If you choose not to take ownership, the vehicle is handed back and another vehicle can be ordered.
Want to find out more?
Click on any of the below links to discover more ...
About Corporate Leasing Solutions for businesses with over 100 vehicles in their Fleet
About Leasing Options for SMEs for businesses with less than 100 vehicles or individuals
About LeasePlan services sold via our Finance Brokers
About Personal Leasing Options for individuals seeking to lease a car
Click on any of the below links to discover more ...
About Corporate Leasing Solutions for businesses with over 100 vehicles in their Fleet
About Leasing Options for SMEs for businesses with less than 100 vehicles or individuals
About LeasePlan services sold via our Finance Brokers
About Personal Leasing Options for individuals seeking to lease a car
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What is vehicle leasing/finance?
Leasing a car means that essentially you rent a vehicle for an agreed amount of time and for an agreed fixed fee.
There are many options to choose from, depending on your own circumstances, and whether you’re leasing for yourself or as part of a business – both of which carry their own benefits.
When it comes to sourcing vehicles for a growing business, leasing can offer a whole lot more than purchasing outright.
What is vehicle leasing/finance?
Leasing a car means that essentially you rent a vehicle for an agreed amount of time and for an agreed fixed fee.
There are many options to choose from, depending on your own circumstances, and whether you’re leasing for yourself or as part of a business – both of which carry their own benefits.
When it comes to sourcing vehicles for a growing business, leasing can offer a whole lot more than purchasing outright.
Key advantages of leasing
- To help you manage your costs, we will analyse your particular needs upfront and state your monthly costs in advance, giving you a much more visible and predictable outlay
- With this lower upfront cost, you’ll have more available cash for your business or to boost your personal budget
- You can take your pick from a large range of new vehicles, the choice is yours
- We will take care of the admin work and processes, leaving you more time to focus on your main work responsibilities
- With leasing, you don’t have to worry about the risk of your valuable assets depreciating and the cost and hassle of handling maintenance is all managed by us
Things to consider before leasing a vehicle
- As the lessee, you are responsible for the maintenance, servicing and ensuring the proper operation of the vehicle
- There are contractual limits which have the potential to lead to extra changes to be mindful of such as; mileage allowances and early termination charges that will be stipulated within your contract
Useful resources
View the Fair wear and tear guide for cars
View the Fair wear and tear guide for vans
For more information on leasing a vehicle, watch our video below for five reasons why business vehicle leasing makes so much more sense.
Key advantages of leasing
- To help you manage your costs, we will analyse your particular needs upfront and state your monthly costs in advance, giving you a much more visible and predictable outlay
- With this lower upfront cost, you’ll have more available cash for your business or to boost your personal budget
- You can take your pick from a large range of new vehicles, the choice is yours
- We will take care of the admin work and processes, leaving you more time to focus on your main work responsibilities
- With leasing, you don’t have to worry about the risk of your valuable assets depreciating and the cost and hassle of handling maintenance is all managed by us
Things to consider before leasing a vehicle
- As the lessee, you are responsible for the maintenance, servicing and ensuring the proper operation of the vehicle
- There are contractual limits which have the potential to lead to extra changes to be mindful of such as; mileage allowances and early termination charges that will be stipulated within your contract
Useful resources
View the Fair wear and tear guide for cars
View the Fair wear and tear guide for vans
For more information on leasing a vehicle, watch our video below for five reasons why business vehicle leasing makes so much more sense.
