Green Car Finance Options

GREEN CAR CONTRACT HIRE

Comprehensive, fixed cost solution where use of your commercial vehicle is important, but without the responsibilities of ownership. This is essentially an operating lease with full maintenance package.

Deposits are anything from 3 rentals upwards

Total budgetary control - fixed costs.

Monthly repayments are subject to VAT - VAT recoverable

Fixed maintenance package to include services, repairs, tyres, dependant on contract type

At the end of the contract, simply hand the vehicle back

At the end of the contract period the vehicle is subject to an inspection, where any reconditioning costs are charged to the customer

ideal for VAT registered larger fleet operators

GREEN CAR PERSONAL CONTRACT HIRE

Personal contract hire is essentially the same as regular contract hire, but it applies exclusively to private individuals. It is the most common form of car leasing and usually when the term 'car leasing' is referred to, most people are talking about personal contract hire.

There are many advantages to personal contract hire including:

• Fixed prices - You can hire both new and used cars at fixed prices and not have to worry about interest charges. This can help you budget.

• Cost effective - The monthly instalments for a personal contract hire agreement will generally be lower than those of a personal loan.

• Road fund licence - This should be included in the agreement.

• Maintenance packages - Most personal contract hire deals will include maintenance packages so you don't have to worry about the general upkeep of the vehicle.

• No depreciation concerns - You don't have to sell the car at the end of the term so you don't have to worry about its depreciation.

• Access to more 'upmarket' vehicles - With a personal contract hire deal, you could afford a car that would otherwise be too expensive. As luxury cars tend to depreciate at the slowest rates, these often provide the best personal contract hire deals.

There are disadvantages to personal contract hire too, but generally these are based on perception:

• Comprehensive car insurance - You will not be able to take out third party car insurance, you'll need a comprehensive deal as the car is not yours.

• You never own the vehicle.

• No option to buy - Unlike a personal contract purchase agreement, there is no chance to buy the vehicle at the end of the contract.
  

Who is personal contract hire right for?

If you run a business, you should investigate regular contract hire as this will include VAT built into monthly payments and additional incentives such as hire rental tax allowances.

However, for private individuals, personal contract hire can be ideal dependent on your circumstances - just think about how you plan to use the vehicle.

If you travel a lot and your mileage is high, the residual value of the car will drop which will increase your monthly payments. However, personal contract hire gives you fixed monthly payments and you have the option to drive a new car every few years, which is an excellent incentive. So as long as you don't mind not taking ownership of a vehicle, personal contract hire could be the right solution for you.

GREEN CAR FINANCE LEASE

This facility provides the customer with the benefits of ownership with minimum deposit and maximum flexibility.
Deposits are usually the equivalent of three rentals, but can be any amount whatsoever
Repayment period of up to 60 months
VAT is paid monthly, then claimed back quarterly (if VAT registered)
Rentals are 100% allowable against taxable profits
Facility can have a balloon profile, which defers a large payment to the end of the contract - thus reducing monthly rental and aiding cash flow
Vehicle sold or part-exchanged at end of contract hirer benefits from 95% of sales proceeds (ex. VAT)
No mileage clauses
Ideal for non-VAT registered business users looking for low initial deposit and maximum flexibility

GREEN CAR PERSONAL CONTRACT PURCHASE

Broadly, personal contract purchase is the same as a personal contract hire agreement - but with one key difference.

At the end of the contract, there is an optional balloon payment that the individual can choose to pay in order to take ownership of the vehicle. This amount is determined at the outset and allows the driver to keep the vehicle if they are happy with it. However, it is not essential - on the contrary, as with a personal contract hire deal, you could choose to return the car to the leasing company and walk away.

Monthly payments are based on the difference between the retail value of the car and the residual value - i.e. the estimated future value of the vehicle after depreciation is taken into account. Therefore, the more the vehicle holds its value, the better your personal contract purchase deal will be as that will reduce your monthly payments.

A mileage limit will apply to all personal contract purchase deals. This is because the leasing company will use the mileage limit to determine the vehicle's depreciation and therefore its residual value. So it's important to be honest with the leasing company about how much travelling you are likely to do - exceeding the mileage limit will lead to penalties.

Personal contract purchase is seen as a direct alternative to hire purchase and is subject to the protections set out in the Consumer Credit Act.

What are the pros and cons of personal contract purchase?

There are many advantages to personal contract purchase including:

• Fixed prices - You know exactly what you have to pay each month, which can help you budget.

• Initial down-payment - Only a small deposit is required.

• Option to defer payments - If you include a balloon payment at the end of the term, you can defer payments.

• Refinance - If you prefer, you can refinance the balloon payment at the end of the term.

• Maintenance packages - Most personal contract purchase agreements will include maintenance packages that can range from basic servicing to total vehicle management.

• No depreciation concerns - It's not necessary to buy the car at the end of the term and so you can still choose to walk away without re-sale concerns.

• Access to more 'upmarket' vehicles - One of the key elements of a personal contract purchase deal is that it gives you access to previously unaffordable vehicles due to the low deposit and low monthly payments.

There are very few disadvantages to a personal contract purchase deal but it is usually more expensive than hire purchase agreements. It's also worth remembering that you will have to arrange comprehensive car insurance as the car will not be yours until the balloon payment is made.

Who is personal contract purchase right for?

Generally, personal contract purchase is seen as the 'best of both worlds' in that you can choose to walk away from a deal, or exercise the option to buy.

Overall, personal contract purchase will generally be more expensive than traditional contract hire and hire purchase deals, but monthly payments are low. If you travel fixed distances and have a stable lifestyle, the mileage issue should not be a problem.

Consequently, personal contract purchase deals are well-suited to people who want to drive a car that would otherwise be unaffordable and who want to keep their options open with the right to buy.

Are you confused by Finance offers? Don't worry - just call us for a free 10 minute Finance Consultation and we'll discuss the pro's and cons of all types of Finance, to make sure you get the best one.