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Types of car finance explained

Contract HireContract Purchase • Finance LeaseHire Purchase
• Operating LeaseSale and Leaseback

Contract Hire

Fix the cost of your vehicles
Car contract hire from Prime Vehicle Management - one of the UK’s leading car leasing companies - could prove ideal for your business. You can focus on core activities, by fixing your costs and avoiding the burden and risk of owning your own vehicles.

Contract hire benefits:

  • Fixed monthly payments - easier budgeting comes as standard
  • Flexible agreement terms - variable terms and mileage available
  • Vehicle maintenance option - include servicing and maintenance in your rentals to help spread the cost
  • Eliminate risk of asset depreciation - at the end of the agreement, you simply hand back the vehicle, subject to return conditions and excess mileage

For a set monthly sum, everything except fuel and motor insurance can be taken care of in your finance package - including servicing, tyres, even the tax disc. At the end of the agreement, you simply hand back the vehicle. Or you could negotiate a favourable extension to the contract.

Contract Purchase

Contract purchase fixes your monthly payments and offers you flexible terms. This type of finance gives you the opportunity to either retain or return the asset at the end of the agreement.

Contract purchase benefits

  • Fixed monthly payments - budgeting is easier when you know the costs in advance
  • Flexible agreement terms - variable terms and mileage available
  • Optional maintenance and added value services - can be included in the agreement for certain assets
  • Guaranteed resale value - we will fix an asset resale value to take effect at the end of the agreement
  • Full ownership at end of contract - you own the asset once all payments have been made

This finance may be preferable if you want to own your asset, yet avoid the risk of depreciating assets. A guaranteed residual value helps improve your cash flow during the agreement while making the asset cost effective to buy.

Finance Lease

The benefits of ownership with spread fixed rentals and disposal taken care of.

Finance lease benefits

  • Low up-front costs - for just a small outlay, you can use the assets immediately
  • Flexible repayment structure - rental payments can be tailored to match your cash flow
  • Fixed or variable interest options - you decide which suits you best
  • Tax advantages - VAT is payable on the rentals, not the purchase price, while payments can normally be offset against taxable profit (special rules apply to cars)

Monthly payments can be matched to your cash flow. At the end of this commercial leasing agreement, the relevant assets are sold and you receive the major share of the proceeds. As the asset owner, we claim the available writing-down allowances and reflect this in your monthly payments.

Hire Purchase

Own your asset while spreading the cost

Hire purchase - otherwise known as lease purchase - is a simple repayment facility, where you eventually own the asset at the end of your agreement with Lombard.
Hire purchase benefits

  • Total control - the asset is yours at the end of the agreement
  • Flexibility in your repayments - makes for easy budgeting
  • Fixed or variable interest options - it's your decision which is best for you
  • Tax advantages - normally you can claim writing-down allowances and perhaps capital grants, while repayment interest may be offset against profits and VAT is usually reclaimable (special rules apply to cars)

There is great flexibility with this type of asset finance. We can structure it in various ways, with a flexible deposit, fixed payments and perhaps a balloon final lump sum.

Operating Lease

Reduce asset risk and boost cash flow

This option is well worth considering for specialised and higher value assets. We own the asset and take the risk of it losing value. Meanwhile, you get to use it for as long as you wish.

Operating lease benefits

  • Fixed costs - for a set sum you can use the asset immediately
  • Cash flow boost - we fix a residual value that lowers your payments
  • Flexible repayments - rentals can be tailored to match your seasonal cash flow
  • Fixed or variable interest options - you decide which suits you best
  • Off-balance sheet - check with your auditor about this business advantage
  • Tax efficiencies - VAT is reclaimable on the rentals, while payments can normally be offset against taxable profit (special rules apply to cars)

We build in a residual value that reduces your monthly payments. This type of commercial leasing instantly aids your cash flow and makes 'off-balance sheet' funding possible. In effect, you can match your fixed rentals to your income - particularly helpful for seasonal businesses.

Sale and Leaseback

With sale and leaseback, you can immediately free the capital tied up in your fleet. You get cash injected straight into your company's reserves.

Sale and leaseback benefits

  • Increased company reserves - the cash released through our purchase goes directly into your business
  • Fixed monthly payments - simplify your budgeting
  • New for old option - at the end of the agreement, trade up to new vehicles through advantageous contract hire

We could offer to purchase your existing vehicles, depending on book value and specific requirements. Then we would lease or contract hire them back to you for an agreed term. Your business retains full use of the vehicles involved, but you will no longer have any of the concerns that come with ownership.

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