Vehicle Finance - What is it?

Simply put vehicle finance is the method by which your business aquires vehicles. In many cases title/ownership of the vehicle will be offered at the end of a contract. Usual methods of vehicle finance are:

• Contract hire
• Contract Purchase
• Finance Lease
• Lease Purchase
• Hire Purchase.

Contract Hire:
Contract Hire is the leasing of a vehicle for a set time and mileage at a fixed monthly rental. The monthly rental (agreed at the onset of the contract) is determined by the cost of the vehicle, the period and mileage covered and the likely value of the vehicle at the end of the contract.

Contract Purchase:
Contract purchase the leasing of a vehicle for a fixed term at a fixed monthly rate. Like contract hire there is usually the facility to purchase the vehicle at the end of the agreement or just return it. The monthly payment includes the total purchase price and takes into account the possible value of the vehicle at end of contract, length of the agreement, mileage and any further packages (such as maintenance) that you may have chosen.

When a vehicle is returned and sold, for an amount greater than that which had been determined at the beginning of the agreement, you may be entitled to a share of any profit derived from disposal.

Finance Lease:
Finance lease is similar to contract hire. Finance leasing is usually for shorter periods than cotract hire/purchase (normally 2-4 years) but rentals can be made monthly, quaterly or even annually. The methods of payment evaluation are similar to the above but on disposal of the vehicle the bulk of the sale proceeds will be refunded to you as a rebate of rentals.

Hire/Lease Purchase:
Lease purchase & hire purchase are the most widely known forms of vehicle finance. Very simialr to the above methods Hire/Lease purchase offers your business to aquire vehicles and spread the cost. The cost of repayments can be effected by the interest rate which can be at an agreed fixed rate or variable. All risks of ownership, maintenance, administration and disposal remain with you and the vehicle is classified as a balance sheet asset. Interest on repayments can, usually, be offset against profits.

For more information on vehicle finance visit State Securities Vehicle Finance