Below are descriptions of the methods of funding we can offer to fund your new glazing van.

Please note we have compiled this information to assist you in choosing the correct funding option, we can not make the decision for you. If you are unsure you should it is essential that you consult with your accountant before making a decision. All information is supplied as a guide and we can not be held responsible for any change in legislation.

Hire Purchase | Contract Hire | Leasing | Full Payout Lease

HIRE PURCHASE
This is the traditional method of funding a vehicle, having the advantage of simplicity and ownership. The vehicle is treated as an asset and therefore is written down at 25% per annum to a maximum of £3000. Commercial vehicles are written down 40% for the 1st year and 25% thereafter, with no limits.

Typical Example - New Commercial Vehicle
Vehicle Cost £18,995.00 + VAT + RFL (12 months road fund licence, including government registration fee £280)
VAT and RFL Deposit £4,079.00
Advance £18,995.00 @ 3.99% Flat
Either 36 repayments @ £ 590.99
Or, 48 repayments @ £ 459.99

Please note typical administration fees apply at £250 on the 1st payment and £150 on the final payment.

CONTRACT HIRE
Hire Purchase | Contract Hire | Leasing | Full Payout Lease

Contract Hire is one of the simplest ways to finance a vehicle on a fixed budget, with no gambling on future residual values. You simply decide the time you'd like to keep the vehicle, the mileage you expect to cover and whether or not you would like the vehicles maintenance to be included in your monthly payment. Contract Hire can begin with a deposit equal to three monthly payments, so a new vehicle doesn't impact too much on your cash flow. Under contract hire agreements the title of the vehicle remains with the hiring company so your vehicle will not appear on your balance sheet.

- Fixed maintenance costs and protection from depreciation (The largest unknown cost of running any vehicle)
- You choose the deposit and the contract term
- Tax efficient
- Reclaim the VAT on rental payments and on fixed maintenance payments (Half VAT for private use)
- 100% can be offset against your taxable profit liability on commercial vehicles
- You can choose from any New Commercial Vehicle.

If you choose to take up the maintenance option on a contract hire plan, all servicing will be included at the manufacturer's recommended intervals as well as replacement tyres and exhausts. The road fund licence is usually included for both maintenance and non-maintenance options depending on the finance company.

Should you find your circumstances alter your anticipated mileage, your monthly payments can be adjusted to avoid excess mileage charges. Maintenance options can also include repairs, punctures, replacement vehicle and breakdown cover.

Disadvantages
You must be very careful in anticipating your annual mileage, if you do too much you will face penalties of 5 - 50p per mile (an average price being 9p), subject to the agreement and the vehicle and if you do too few you will not get a refund. Some over mileage penalties are charged annually, most at the end of the agreement. If you decide to change the vehicle someway through, be prepared to pay heavy costs, up to the total pay back of the agreement at full term.

In Our Opinion
On the whole, if you choose a standard specification vehicle and avoid the pitfalls aforementioned, contract hire can give you a great deal of piece of mind. However, with most new vans having 3-year warranty and low cost servicing you can work out the cost of running the same van on a non-maintenance lease agreement to within a few hundred pounds. It's worth doing the comparison every time, especially given the reduced price of vehicles and the forecast future stability in resale value and depreciation. Take advice from your accountant before entering the agreement.

LEASING (With Final Balloon)
Hire Purchase | Contract Hire | Leasing | Full Payout Lease

Lease finance offers the benefits of acquiring a vehicle on low monthly rentals that are offset against final larger Balloon payment - an agreed figure that is matched to the anticipated residual value at the end of the finance term. Due to the nightmare situation in the past, these forecast figures are now more conservative and provided your mileage is accurate and the van in good condition you should not find yourself with negative equity. The legal title of the vehicle remains with the lessor. The initial rental for a lease finance agreement can be as little as 3 month's payments.

- Low monthly rentals offset by a final larger payment that is covered by the vehicle's future residual value.
- No large deposit to find
- 100% can be offset against your taxable profit liability
- You can choose from any make or model of commercial vehicle.

The end of term Balloon payment is fixed at the beginning of the agreement so right from the start you know exactly what your future financial commitments will be. On payment of this final figure, you take charge of the collateral within the vehicle with no further financial commitments. However, most businesses will of course want a new, replacement vehicle. This is usually done by raising the Balloon payment with the sale of the existing vehicle before funding it's replacement with a new lease finance agreement. If the figure raised from the sale of the vehicle is greater that the final payment, the difference is yours.

Disadvantages
The residual (Balloon) Payment is calculated using a forecast system, this is a guide only and cannot be 100% guaranteed and obviously if you exceed the mileage or abuse the vehicle it may not achieve sufficient funds on sale to cover your outstanding rental (your liability).

In Our Opinion
A tax efficient way of funding your new van and maintaining low monthly payments. Take advice from your accountant before entering into the agreement.

FULL PAYOUT LEASE
Hire Purchase | Contract Hire | Leasing | Full Payout Lease

You can have a Full Payout Lease that reduces the outstanding balance to zero over a 2 to 5 year period.

- No large deposit to find
- 100% can be offset against your taxable profit liability
- You can choose from any make or model of commercial vehicle.

Disadvantages
Interest charges work out at 1% - 2% flat rate more that the equivalent Hire Purchase agreement. If you choose to settle early you may have to pay as much as all of the charges due on the agreement, this figure cannot be forecasted and is not always regulated. Pay particular attention to the section termed - sale proceeds, the leasing company can request a premium of as much as 20% of the sales proceeds at the end of the term, (we only work with companies who take between 5-10%), most are only 10% and this will be made very clear to you on signing.

In Our Opinion
Enter into a Full Payout Lease as an alternative to Hire Purchase if you find yourself needing a tax shelter, be sure to run the lease to full term to gain full tax efficiency. Take advice from your accountant before entering into the agreement.

Important Information
At the end of the lease agreement you have to either: -

1. Arrange Sale/Part Exchange of the vehicle to a third party because you cannot have the tax efficiency of the rental and ownership. You arrange the sale, the sales invoice comes from the finance company, but you collect the cheque and retain 90% of the amount.

2. You are also able to enter a secondary rental period known as a peppercorn rental. You can pay an equivalent to 1 monthly rental, but annually for a maximum of 2 years which effectively delays the need to sell the vehicle but still acts as a rental. However, you will still have to sell the vehicle at the end of the period. As in option 1, normally at a very low figure.

Please note we have compiled this information to assist you in choosing the correct funding option, we can not make the decision for you. If you are unsure you should it is essential that you consult with your accountant before making a decision. All information is supplied as a guide and we can not be held responsible for any change in legislation.