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Car Finance Products Explained

  Lease Purchase or Hire Purchase Finance Lease Contract Hire Contract Purchase / PCP
Who owns the vehicle? The Funder until the final payment is made The Funder, at the end of the term the client must sell the vehicle or peppercorn rent The Funder The Funder until the final payment is made
Who carries the Residual Value risk? The Client The Client The Funder The Funder
Who carries the ongoing Maintenance risk? The Client The Client The Funder assuming a maintenance contract is taken The Funder assuming a maintenance contract is taken
Is the vehicle on or off the balance sheet? On balance sheet On balance sheet Off the balance sheet On balance sheet
Typically, how much cash is required up front? As little as 5% but generally around 10% Generally, 3 rentals/payments in advance but can be as little as 1 Generally, 3 rentals/payments in advance but can be as little as 1 Generally, 3 rentals/payments in advance but can be as little as 1
Who arranges delivery and collection of the vehicle? The Client The Client The Funder The Funder
Does the customer own the vehicle at the end of the contact? Yes No No Yes, if the final lump sum purchase payment is made
Can the monthly payments be offset in full against tax? The finance element can be offset. Capital allowances are available on your balance sheet Contact us for more details All of the monthly rentals may be offset against tax. For vehicles costing over £12,000 a proportion is disallowed. In addition 100% of the maintenance payments may be fully offset The finance element is allowable with no rental restriction for cars over £12,000. Capital Allowances are also available
Assuming some private use, what % of input VAT can be reclaimed? None 50% of the VAT on rental payments. 100% of the VAT on maintenance 50% of the VAT on rental payments. 100% of the VAT on maintenance None
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