Car Leasing Funding Options
An overview of the various car lease financing methods available.
The grid below outlines the answers to various key questions about car leasing methods - Outright Purchase, Lease Purchase or Hire Purchase (HP), Finance Lease, Contract Hire and Contract Purchase.
All these funding methods are available to business clients and many to personal clients as well. Contract Hire and Leasing is the most popular option for businesses but you are advised to check with your financial advisor about the most suitable funding method for your particular circumstances if you are unsure. Personal Contract Hire is the most popular method of funding for private individuals.
| Outright Purchase | Lease Purchase or Hire Purchase (HP) | Finance Lease | Contract Hire | Contract Purchase | |
|---|---|---|---|---|---|
| Who owns the vehicle? | The Customer | The Funding Company until the final payment is made | The Funding Company until the final payment is made | The Funding Company | The Funding Company until the final payment is made |
| Who carries the Residual Value risk? | The Customer | The Customer | The Customer | The Funding Company | The Funding Company |
| Who meets the ongoing Maintenance cost? | The Customer | The Customer | The Customer | The Funding Company assuming a maintenance contract is taken | The Funding Company assuming a maintenance contract is taken |
| Is the vehicle on or off the Balance Sheet? | On balance sheet | On balance sheet | On balance sheet | Off balance sheet | On balance sheet |
| Typically, how much cash is required up front? | 100% of vehicle purchase price | Typically 15% of purchase price | Typically 15% of purchase price | Typically 6-7% of the purchase price (i.e. 3 months advance rental) | Typically 6-7% of the purchase price (i.e. 3 months advance rental) |
| Who arranges delivery and collection of the vehicle? | The Customer | The Customer | The Customer | The Funding Company | The Funding Company |
| Does the customer own the vehicle at the end of the contact? | Yes | Yes | No | No | Yes, if the final lump sum purchase payment is made |
| Can the monthly payments be offset in full against tax? | There are no monthly payments. Capital Allowances can be offset against tax but are limited to 25% or the vehicle price of £3000 per annum whichever is the greater. | The finance element can be offset. Capital allowances are available as per "outright purchase" | All of the monthly rentals may be offset against tax. For vehicles costing over £12,000 a proportion is disallowed. | All of the monthly rentals may be offset against tax. For vehicles costing over £12,000 a proportion is disallowed. In addition 100% of the maintenance payments may be fully offset. | The finance element is allowable with no rental restriction for cars over £12,000. Capital Allowances are also available. |
| Assuming some private use, what percentage of input VAT can be reclaimed? | None | None | 50% of the VAT on rental payments. 100% of the VAT on maintenance. | 50% of the VAT on rental payments. 100% of the VAT on maintenance. | None |
Please Note: For Vehicle Lease Contracts shown on this website, unless otherwise stated, Business Contract Hire monthly rentals exclude VAT and maintenance, include Road Fund Licence and assume an initial payment equivalent to 3 monthly rentals. Personal Contract Hire monthly rentals include VAT and Road Fund Licence but exclude maintenance and assume an initial payment equivalent to 3 monthly rentals. Where they are given on this website, fuel consumption figures (MPG) are the combined average of urban and extra-urban driving as provided by the manufacturer. Variations to the Lease Type, Lease Term, Annual Mileage and therefore Monthly Payment are all available on request. All figures and details may change without notice. Vehicles are subject to availability at time of order. Images are for illustrative purposes only. Click Here for a Glossary of Car Leasing Terms.
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