Van and Commercial Vehicle Finance

Business Contract Hire (BCH) is a finance option offered by Complete Vehicle Management. This is suitable for companies and individuals registered for VAT. The main advantage is that the VAT portion is up to 100% recoverable on a commercial vehicle. This is not a suitable option for an individual who is not VAT registered.

If you're VAT registered, the VAT portion of your payment is 100% recoverable if the vehicle is used solely for business use and can be offset against your company's taxable profits. 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 24 and 60 months – and monthly rentals are set based on agreed mileages.

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, vehicle tax is renewed automatically.
• Your payment is purely a rental, so it sits off your balance sheet, avoiding being classed as a depreciating asset.

Finance Lease (FL) is a finance option offered by Complete Vehicle Management.

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 payments rather than requiring payment up front as is the case with a purchase product.

You can choose to lease your van with or without balloon payment due at the end 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 sale price (normally 5%) 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.

Hire Purchase (HP) is a finance option offered by Complete Vehicle Management. Simply:

• Pay a deposit (minimum of all the VAT)
• Pay monthly instalments over an agreed time
• Once all payments have been made you will own the van

It is different from other types of borrowing because you don’t own the van until you have paid in full. Under an HP agreement, you hire the van and then pay an agreed amount by instalments. You may settle the agreement at any time.

This is a simple finance option and comes with many benefits:

• Fixed monthly payments suited to your budget
• Available over payment periods between 24 and 60 months
• Able to borrow between £3,000 to £50,000
• The interest rate is fixed and competitive
• Available on vans up to 10 years old at the start of the agreement
• There are no mileage restrictions

Disadvantages of Hire Purchase

• You won’t own the asset until you have made the final hire purchase payment. 
• While spreading the cost of an asset is in most situations a benefit, you have to be willing to commit to the payments for the duration of the term.

Contract Purchase (CP) is a finance option offered by Complete Vehicle Management. This finance option is suitable for those looking for a van for their business and is a great way to pay monthly payments and have the option to own the van at the end of the agreement.

There are many benefits to Contract Purchase:

• Flexible deposit, mileage and terms to suit your circumstances
• Set payments to suit the business budget
• Fixed payments over the finance term so you know exactly what you need to pay every month
• You can include maintenance in the monthly payment

There are three options at the end of agreement:

1. Pay off the deferred amount in full and keep the van (please note, you do not own the van until you make this final payment)
2. Hand the van back to the finance company
3. Trade the van in against another van

Disadvantages of Contract Purchase:

• The vehicle will not belong to you until you have made all payments due under the contract.
• If you hand the vehicle back and have exceeded your annual mileage you will be charged at the pence per mile as detailed in your agreement.

Lease Purchase (LP) is a finance option offered by Complete Vehicle Management. You make regular monthly payments and you will own the van at the end of the agreement, you do not get different options at the end like you do with Contract Purchase.

You will normally need to pay an advanced sum (usually 3-6 advanced monthly payments) which is equivalent to a deposit and there will be a deferred sum that must be pad at the end of the agreement, which once paid means you own the van.

The advantages of a lease purchase finance option are:

• You own the van at the end of the agreement (once final deferred sum has been paid)
• Gives your business immediate cash flow benefits
• Available over payment periods between 24 and 60 months
• Fixed interest rate

Disadvantages of Lease Purchase:

• The balloon payment must be paid for at the end of the contract 
• The vehicle is yours once you have paid the balloon payment. In some cases the balloon can be higher than the residual value 

If you would like to purchase the van outright, you are also able to do this at Complete Vehicle Management, simply ask us for the cash price.