Vehicle leasing is a little bit like a mobile phone contract: you pay a deposit and make monthly payments. Instead of minutes, texts and a data allowance, you get a mileage allowance on your car or commercial vehicle.
At the end of your leasing period, you can upgrade to the latest models available and adjust your terms to suit you better.
There's a little more to it than that and there are lots of options, but all in all, it's pretty simple, really.
At CVM, we make vehicle leasing as straightforward as can be. Whether it's a car or a van you need, we'll get you the best deals out there.
And if a good deal is what you're after, keep an eye on our car leasing offers (or if it's a van you need, have a look at our van leasing offers). We're always making sure our deals are the best they can be around the clock, so get your hands on our great offers while they're hot.
Want to know more about vehicle leasing and the types available to you? It's all here - select any of the products below to learn more.
Call us today on: 01489 880050
Personal Contract Purchase (PCP)
PCP offers lower monthly costs with the ability to own your car outright at the end of the contract.
When we calculate your monthly payment, your deposit and guaranteed future value (GFV) are taken into account. GFV is a deferred payment, specific to every car and taking agreed mileage into account. It allows for significantly reduced monthly payments when compared with a traditional hire purchase agreement. This in turn allows you to choose a better car.
At the end of the period of hire, you can choose whether to settle the GFV and take full ownership of your car or choose from a range of other options, including:
- Use your car for part exchange on your next one
- Sell privately and use the proceeds to settle the GFV
If the car market at the time means the car is worth less than the GFV, simply hand it back with nothing more to pay (subject to condition and mileage).
This is suitable for companies and individuals registered for VAT. The main advantage is that the VAT portion is up to 100% recoverable.
If you're VAT-registered, the VAT portion of your payment is 100% recoverable if the vehicle is used solely for business use. This figure drops to 50% if the vehicle is also available to the driver for personal use.
The vehicle will be hired for a set period of time – typically between 12 and 60 months – and monthly rentals are set based on agreed mileages.
The other main advantage for VAT-registered companies is that up to 100% of your rental can be offset against your company's taxable profits.
Other benefits of contract hire include:
- There is no risk of depreciation leaving you with an unexpected cost in the future. With no ownership risk on your part, all you need to adhere to is mileage restrictions and wear-and-tear regulations to ensure your monthly costs are all you will pay.
- There is the option to have all your maintenance costs included in your monthly rental.
- Administration relating to your vehicles is reduced. For example, all tax discs are automatically sent to you as required.
- Your payment is purely a rental, so it sits off your balance sheet, avoiding being classed as a depreciating asset.
Hire Purchase (HP)
A simple way to spread the cost of your vehicle over a set period. At the end of the finance period, you own the vehicle outright with nothing more to pay.
Because HP payments lead to the full cost of the vehicle being settled by the end of your contract, monthly payments will be higher than with the same car funded using a PCP product. The advantage is that with no deferred balloon payment attracting interest over the term of the loan, the full amount paid and total cost of credit is lower than the cost would have been with a PCP.
Lease Purchase (LP)
LP can be described as an HP agreement with a balloon. Although similar to PCP, there are some significant differences to be aware of.
LP offers the lower monthly costs associated with a deferred payment balloon product in the same way as PCP does. It is typically used only when PCP is not available for a particular car or contract requirement. Frequently, this will be down to the age of the car or your mileage requirements.
Your balloon payment to be settled at the end of the contract is still calculated on the same terms as with PCP, but the final value is not guaranteed. In effect, this means that you must settle or refinance the balloon payment yourself.
This is not typically a cause for concern because, as mentioned above, balloons are still calculated taking your mileage and the age of your car or van at the end of the contract into account. When settling this final amount, there is no benefit to the funder for your car to be worth less than the balloon. If you default on the loan and the car is repossessed, the funder will not want to be unable to recover outstanding costs by selling your vehicle.
Finance lease provides the option for VAT-registered users to pay for vans off balance sheet, spreading the cost of the VAT to the monthly payment rather than requiring payment up front as is the case with a purchase product.
You can choose to rent your van with or without balloon payment due at the completion of the initial lease period. Monthly payments will be reduced during the rental if you choose the balloon option.
Once the initial lease period has ended, you will have the option to sell the van on behalf of the finance company and pay them a percentage of the profits or extend the lease, paying only a peppercorn rental.
Note that if you choose the balloon payment option to reduce your rental, this will need to be settled as part of either of these options.
Contact our team today to discuss your new or used car and van requirements and to discuss the ideal finance option for your situation.