Hire/Lease Purchase

Hire Purchase allows the purchase of an asset over a set term. The customer then pays the purchase option and owns the asset. You can claim writing down allowances as if you were making an outright purchase, and VAT is reclaimable on the capital cost.

Features

Ownership at end of finance agreement term VAT on equipment cost is paid in full at outset Equipment shows as an asset on the balance sheet and the amount owed as a liability There is a choice of using fixed or variable rates

Benefits

Customer can claim writing down allowances No VAT is charged on the repayments Tax relief can be claimed against finance interest payments Regular fixed payments make budgeting an easier process Customer retains control of vital working capital, which is often more essential to running the day-to-day activities of the business

Finance Lease

Finance Leasing allows the full use of the latest machinery with the minimum initial outlay. Repayments are based on the full capital cost plus interest and are payable on a monthly, quarterly or annual basis. At the end of the term, the customer benefits from receiving a substantial percentage of the sale proceeds.

Features

Use of the latest machinery without ownership Rental can be extended to a 2nd period at a reduced payment Equipment can be sold at the end of the finance term Rentals are subject to VAT The asset shows as on balance sheet, with the payments as a liability

Benefits

Minimum initial outlay preserves the working capital and increases cash flow Nominal annual extension rentals· Customer retains the majority of the sale proceeds Finance company pays the VAT on equipment cost The VAT on the repayments can be reclaimed

Operating Lease

An Operating Lease allows the customer to benefit from using an asset without having to purchase it. Repayments are relatively low as they are based on the full capital cost less the anticipated value at the end of the lease (residual value) plus interest. The asset is returned to the finance company at the end of the term.

Features

Use of the latest machinery without ownership Equipment does not show on the balance sheet No residual value risk for customer Payments are based on a percentage of the original capital cost The finance company are responsible for recovering the cost upon resale of the asset

Benefits

Low initial outlay to obtain use of new assets Improves key ratios on company's balance sheet Low repayments enable customer to retain working capital and increase cash flow No risk of depreciation or disposal concern Total rental is allowable against tax as a business expense

Contract Hire

Contract Hire allows the use of the most up-to-date assets over a certain period with fixed repayments. The repayments can also include the operating costs of the asset such as delivery, servicing and maintenance.

Features

Use without ownership Can include maintenance and service cover Rental provided by equipment supplier and finance company Fixed interest payments

Benefits

Complete equipment support in one package. Total rental is allowable against tax as a business expense. No residual value risk for the customer Budgeting is made easier by the fixed interest rate payments