Our vans are nearly all provided with either a Finance Lease or Contract Hire contract as this allows us to offer the biggest discounts and the best deals. Here we explain the basics of both forms of van leasing.
Business Contract Hire is a contract between a business and a vehicle leasing company for the business to hire a vehicle of their choosing with an agreed contract term, annual mileage and monthly rental.
A Full Maintenance and Servicing Package can be included for a fixed monthly amount.
Things to consider with Contract Hire
If you go over the agreed total mileage you will pay an excess mileage charge so try and estimate mileage as accurately as possible.
You will be billed for any damage exceeding that stated in the Fair Wear and Tear Guide so try and return the vehicle in good condition.
Early termination of the contract can be expensive as the finance company may look for between 50% and 100% of the remaining rentals.
Finance Lease is a contract between a business and a vehicle leasing company for the business to hire (lease) a vehicle of their choosing with an agreed contract term, fixed monthly rental and with the option of an increased final rental known as a balloon rental.
The larger final rental means lower monthly payments which can help businesses with cash flow.
With Finance Lease the financial risk and reward on the sale of the vehicle is with the customer. At the end of the lease period a business can sell the vehicle to an independent third party and keep 98-100% of the sale value.
You will also have the option to extend the lease by paying an annual nominal rental which is usually equivalent to the monthly rental. This annual rental is known as a “peppercorn rental”. Either way you must pay any final rental.
For tax purposes many accountants will treat a Finance Lease as if the asset were owned and so depending on your commercial assets value you can offset 100% of the van cost against the company’s taxable profit in the first year. Interest charges may also be offset against your taxable profit.
NOTE – Please clarify this with your accountant!
Things to consider with Finance Lease:
If you have a balloon payment on an agreement please make sure that it is in line with the finance companies’ recommended value for the mileage you will be doing or you may have negative equity at the end of the agreement.
We can provide Lease Purchase (same as Hire Purchase) and Contract Purchase if requested.
Lease Purchase is a financial agreement whereby you pay for the vehicle in monthly installments over a fixed period of time and automatically take ownership of the vehicle at the end of the agreement. Lease Purchase is simply Hire Purchase with a balloon payment at the end you are required to pay.
Benefits of Lease Purchase:
Note: If you have a balloon payment on a Lease Purchase agreement please make sure that it is in line with the finance companies recommended value for the mileage you will be doing or you may have negative equity at the end of the agreement.
A Contract Purchase is effectively the same as a Hire Purchase agreement but with a guaranteed balloon payment at the end. The customer has the option at the end to either pay the balloon payment and own the vehicle, handing it back or trading it into a dealer. Full maintenance and servicing package can often be included for a fixed monthly amount which will depend on the vehicle and contract terms such as mileage and length of contract.
Benefits of Contract Purchase:
Considerations with Lease Purchase and Contract Purchase:
End Of Contract
At the end of the contract the vehicle will be collected by an agent on behalf of the finance company.
The agent will carry out a full vehicle inspection, checking for damages on the exterior and interior of the car. As a result of this inspection, you may receive a damages bill from the finance company. The inspection and any charges made should be in line with the industry standard fair wear and tear guide which is produced by the British Vehicle Rental and Leasing Association. You can view a copy here.
As a basic guide, you should take good care of the vehicle and make sure it is serviced and maintained as per the manufacturer and leasing company guidelines.
Frontier Vehicle Leasing Limited are members of:
Frontier Vehicle Leasing Limited are appointed brokers for the following finance providers: