Leasing and Contract Hire explained by SGP Leasing
For most businesses, using capital for vehicles simply doesn't make good economic sense.
You lose out on cashflow and tax advantages and leave the business short of cash for expansion, taking on new staff or buying new equipment. Even if the funds are readily available, there are other areas which will produce a better return on investment.
Therefore, choosing the right finance plan is extremely important:
Do you want to own the car at the end of the agreement?
If the answers to this question is Yes, and you want a simple repayment scheme, then we'd recommend Hire Purchase. If you'd prefer more flexibility, then Personal Contract Purchase (PCP) could be for you.
However, if the answers No, then Contract Hire can offer the perfect solution for you & your buisness.
Contract Hire with or without maintenance?
Without maintenance - An operating lease without maintenance or servicing. It is a simple and straight forward facility that can offer some businesses a tax efficient motoring package that lets you take control of your own vehicle servicing and maintenance.
With maintenance - Simply an operating lease that includes full maintenance and servicing. It provides a complete fixed cost motoring package, leaving you free to concentrate on running your business, and enables you to drive a brand new vehicle every few years.
It really is that simple!!
Contract Hire offers many other features and benefits, some of which are outlined below
- Additional credit line - a new car or van is affordable
- Fixed cost - easy budgeting
- Fixed motoring with maintenance optional - minimise risk, control expenditure
- Reduced risk - no worries about disposal or depreciation
- Reduced administration - concentrate on core business activity
- No capital investment - more capital for inward investment
- Vat is reclaimable on 50% of the repayments and 100% claimable on the maintenance element of the vehicle should you choose this - reduced monthly rentals
Tax & capital allowances...explained
The way in which vehicles are funded can have a significant effect on the financial profile of a company as shown by its Balance Sheet.
Off Balance Sheet
Accounting law states that Contract Hire agreements may be treated as 'off balance sheet' for the purposes of improving key accounting ratios. This means that the vehicle is not shown as an asset nor are the rentals shown as liabilities. It shows as a cost in the profit and loss account, therefore offering a tax saving in most circumstances. Please seek professional advice on this subject from a qualified accountant.
Tax Allowances - Contract Hire
50% of the VAT charged on the finance element of the monthly rental may be recovered by VAT registered companies. In addition, the lessee can also claim 100% of any maintenance rental paid. The VAT on any maintenance contract is always fully recoverable and may not therefore be offset against taxable profits.
Capital Allowances
Also known as Writing Down Allowances. These apply to all purchase types of finance contracts. For example, businesses may claim 25% of the value of the car (up to £12,000) based on a decreasing balance annually.
Mitsubishi
The Contract Hire Finance plans shown throughout this site are applicable
to Business Users only and are subject to status through SGP Leasing, Dragon
Lane, Dragonville Industrial Estate, County Durham, DH1 2XJ.
*Monthly rentals are based upon a repayment pattern of 3 rentals in advance
(6 for L200) and an acceptance fee of £125 followed by 35 rentals monthly
in arrears. All rentals are subject to VAT.
The figures are based upon an annual mileage of 10,000, excess mileage will be charged for. Full written quotations available upon request from SGP Leasing. Indemnities may be required. Offer is only applicable in the UK (excludes Channel Isles & I.O.M). Offer valid until 30th September 2006. This offer is not available in conjunction with any other offer. Models shown for illustrative purposes only.
Fiat
Payments are based upon a repayment pattern of 3 rentals in advance followed
by 47 rentals in arrears. All
rentals are subject to VAT. Monthly equivalent £150.91
+ VAT.
The figures are based upon an annual mileage of 12,000 without full maintenance, excess mileage will be charged for. Full written quotations available upon request from SGP Leasing. Indemnities may be required. Offer is only applicable in the UK (excludes Channel Isles & I.O.M). Offer valid from 1st January to 31st December 2006. This offer is not available in conjunction with any other offer. Models shown for illustrative purposes only.
For more information on Leasing or Contract Hire, fill in the form on the right or call Bob Booth, Lisa
Jones or Debbie Clarke on 0845 111 8000.