Company Car Finance

Company Car Finance Options 1 - Hire Purchase

Hire Purchase offers a straightforward way to finance a company car, because it allows you to spread the cost of your new car over a fixed term period. You pay a fixed rate of interest and benefit from fixed monthly payments, making budgeting simple and easy.

You choose the amount of deposit you wish to pay, typically between 10%-50% of the car’s price. The remainder of the balance, together with the interest, is repaid over an agreed period (12-60 months).

Company Car Finance the key benefits of Hire Purchase are:

• Low deposit - doesn’t tie up personal or business assets
• Fixed monthly payment – makes budgeting simple
• Flexibility - doesn't compromise your other lines of credit
• Assets - you gain ownership of the car
• Tax benefits - tax allowances for business users
• VAT free - no VAT on payments

Company Car Finance Options 2 - Hire Purchase with a balloon payment

Hire Purchase with a balloon offers lower monthly payments than standard Hire Purchase. Instead, at the end of the agreement, you can make a final lump sum payment (or 'balloon') to purchase the car in full.

It's fixed rate finance, but with a lower fixed monthly outlay since you defer repayment of some of the borrowing. At the end of the agreement you have a number of options including car purchase, refinance, part-exchange or resale.

The deposit you pay is flexible - typically between 10% - 50% of the car’s full price. The deferred balloon element is calculated on the estimated future resale value of the car.

The difference, plus interest, is repaid in equal instalments over an agreed period (12-60 months), plus a final balloon payment.

Company Car Finance - Hire Purchase with balloon – key benefits:

• Low deposit - doesn’t tie up cash reserves
• Lower fixed monthly payments - perfect for budgeting
• A better car - lower payments can help you choose a higher specification car
• Flexibility - does not compromise your other lines of credit
• Assets - you gain car ownership
• Tax benefits - Tax allowances for business users
• VAT free - no VAT on payment

Company Car Finance Options 3 - A Balanced Payment Plan

A Balanced Payment Plan offers the benefits of a fixed monthly payment, however unlike Hire Purchase, where the interest is fixed, Balanced Payments tracks the changes in the finance house base rate, LIBOR or bank base, depending on the agreement. As rates fall or rise over the period of the contract, so does the interest charge you pay.

How does it work?

You pay an initial deposit and pay the balance in fixed monthly instalments over an agreed term (12-60 months).  At the end of the term any variation of interest is reconciled and will be settled as either a credit to you, or a charge.  Other options available with Balanced Payment Plan include a deferred final ‘balloon’ payment and the ability to make lump sum reductions during the agreement.

The benefits of Balanced Payment Plan

• Flexible - reducing interest penalty options for early settlement
• Low deposit - doesn't tie up cash reserves
• Adaptable - optional lump sum over payments
• Fixed monthly payment - perfect for budgeting
• Tax benefits - Tax allowances for business users
• Potential savings - save if interest rates fall
• VAT free - no VAT on payments

Company Car Finance Options 4 - Personal Contract Purchase (PCP)

Personal Contract Purchase (PCP) is an increasingly popular choice for car finance especially among company car drivers. It offers the best in flexibility at the end of the agreement, together with low, fixed monthly payments.

PCP is perfect if you are opting out of your company car scheme. Your company car allowance can fund your monthly payments, but there is no company car tax to pay.

At the beginning of the agreement your car's guaranteed future value (GFV) is calculated, based on an agreed mileage and age. This is deferred as a final 'balloon' payment.

With PCP you don't have to commit to buying the car at the outset. You use it for an agreed period of time (24-48 months) and then decide at the end of this period what you would like to do. You have four options:

• Buy the car by paying an agreed minimum residual value
• Part-exchange the car for another
• Sell the car privately (paying off the balloon)
• Or, subject to mileage and condition, return the car with nothing more to pay

The benefits of Personal Contract Purchase:

• Low risk - a minimum future value is guaranteed
• Low deposit - keeps valuable personal or business cash available
• Low fixed monthly payments - perfect for budgeting
• Choice - buy the car, part-exchange it or just return it
• A better car - lower payments can help you choose a higher specification car
• Tax advantage - the cash alternative when you opt out of a company car scheme is not subject to company car tax
• VAT free - no VAT on your payments