“If you want a high quality vehicle but find the monthly payments prohibitive, then consider a Personal Contract Plan. You don’t have to compromise on quality just because you work to a budget; PCP offers you the best of both worlds.”
Mike Lowe – Managing Director

Similar in principle to a hire purchase, but instead of paying off the entire value of the car, you are only paying off the depreciation. Ownership remains with the lender. At the end of the term you can simply return the car, change it and begin a new term or buy it at the residual price agreed at the start of the loan.

This means a much lower monthly payment than with hire purchase on the same vehicle.

“This is a tax efficient form of leasing whereby the lessor (owner of the lease) takes a residual value in the goods. The good news is that this means lower payments for you – the customer – as the full cost of the equipment is not recovered over the period of the lease. Plus this sort of leasing is ‘off-balance sheet’ and can be highly tax efficient – check it out with your auditor. It’s great for matching fixed rental payments to income, which is particularly useful for seasonal business.”
Mike Lowe – Managing Director

Note that by taking an Operating Lease you negate the risk of depreciation, as the value of the asset at termination is no longer the lessee’s concern. However there will always be strict mileage or usage restrictions on an Operating Lease since the lessor must calculate their residual position with some certainty based on the usage the asset has had.

We can arrange a maintenance agreement to run alongside the operating lease, enabling you to maintain control of your running costs and margin if you are sub-hiring the vehicle or equipment.

“Hire or Lease Purchase is a simple facility which allows the customer to spread the cost of their investment and to gain title at the end of the agreement, either automatically or on payment of an option to purchase. For tax purposes, from the beginning of the agreement the business customer is considered as the owner of the equipment and can therefore claim capital allowances. Repayment interest is usually offset against profit.”
Mike Lowe – Managing Director

Great news!

VAT on the purchase is typically paid at inception meaning that all the VAT is reclaimable at the end of that VAT quarter. So with the right timing and a VAT-only deposit cash flow remains largely unscathed.

Now there are different ways of structuring Hire Purchase agreements for your convenience, and we have a full range of products including:

Variable Rate HP – Payments terms can increase or decrease with Banking Base Rates, and interest is calculated daily.

Fixed Rate HP – Your payment terms won’t fluctuate with Banking Base Rates, so you can budget more accurately.

Structured Payment Profile – we can consider:

VAT Deferral – Pay the VAT on month 2 or 3 of your agreement to coincide with your VAT quarter

Seasonal Payment Profile – If your business is seasonal a payment profile to reflect your busy periods can be negotiated

Decreasing Payment Profile – Pay more of the capital back in the early period, leaving lower payments towards the end when maintenance costs may be higher.

Lease Purchase – Build in a ‘balloon’ payment into the agreement, reducing your monthly expenditure. You will have less equity at the end of the loan.

“A Finance Lease is similar to Hire Purchase in that the full cost of the equipment is recovered over the lease period. However the initial outlay is usually lower in the case of a lease, since VAT is payable on your rental payments and NOT up front as with Hire Purchase. The customer doesn’t own the equipment, but they are responsible for maintaining the asset and can apply for tax allowances in this regard. When the lease period ends, the customer can agree to a secondary lease period with significantly reduced payments. Alternatively the asset may be sold to a third party and the customer receives a major share of the sale value.”
Mike Lowe – Managing Director

So, a Finance Lease may be an ideal way of keeping your fleet up to date without that heavy initial outlay. And payments can be structured to meet your circumstances and requirements. For example choosing a balloon payment can significantly reduce your monthly rental payment.

Equipment obtained via a Finance Lease will appear on the lessee’s balance sheet.

“Sale and Leaseback arrangements release capital tied up in assets, allowing you to maintain their use. The current value of the assets you are able to capitalise are assessed and then purchased from you. These are then immediately leased or financed back into service at a monthly rate you can afford.”
Mike Lowe – Managing Director

Another reason to refinance a piece of equipment might be that when you procured the kit you didn’t realise asset finance was an option open to you on the equipment procured. Alternatively you could be buying overseas goods from a supplier who requires payment before delivery to the UK. Once you have received them we are able to then release the capital you invested, repaid with interest over an agreed fixed-term period.

Benefits of this type of finance include:
• a revitalising cash injection without immediate exposure to current banking
• it’s tax efficient
• retention of ownership at the end of the agreement