Leasing Explained

CONTRACT HIRE

This is the type of scheme most favoured by VAT reg. businesses who choose not to own their vehicles. The vehicle is effectively taken on a projected mileage related rental contract, usually with maintenance included and for a term of between 2 to 4 years. The vehicle is not owned by the business (i.e it is off Balance Sheet) and has the advantage of fixing the major part of the vehicle's running costs (excluding Insurance and fuel) for budgetary and cash flow purposes over the agreement.

CONTRACT/LEASE PURCHASE

As the name suggests, these and similar schemes are a means to acquiring ownership and as such the vehicle is usually taken on to the balance sheet of a business as a depreciating fixed asset from the moment the contract commences. Payment structures differ but the low up front payment combined with a final 'balloon' payment at the end of the finance term (2 to 4 years) is popular keeping monthly repayments low.

PERSONAL CONTRACT HIRE

Designed originally for company car drivers opting to take a car allowance in place of their company car, this non-ownership rental scheme (similar to business contract hire but with VAT inc. and optional fixed maintenance available) is increasingly finding favour with other private car drivers wishing to change their car on a regular basis and fix their car running costs for the period of the contract .