Finance Options Explained: A Brief Guide To Available Finance Options

What is Hire Purchase?

Hire Purchase/Conditional Sale is one of the most common methods of funding a vehicle purchase.

A simple and traditional way to finance your vehicle over a fixed period for a fixed monthly repayment.

The loan is secured against your vehicle and once all the repayments due under the terms of the agreement have been made you take ownership of the vehicle.

New Vehicle Solutions Limited will help you determine the amount you need to borrow and establish the loan term most likely to keep your repayments affordable now and in the future

What are the benefits of Hire Purchase on a Van or Commercial Vehicle for you and your business? 

We speak with a number of business owners who do not have a full understanding the benefits of Hire Purchase for their business. 

Hire Purchase seems to be the 'Old Fashioned' way to finance a commercial vehicle, why is that? 

The minimum deposit required for a Commercial Vehicle is generally the FULL V.A.T of the Van purchase cost. On occasion, the finance provider may request and additional 10 or 20% in addition to the V.A.T.

If you or your business are V.A.T Registered - You are able to then reclaim the V.A.T in your next V.A.T Quarter.

If you are NOT VAT Registered - It's 20% of the vehicle cost that you may not be able to reclaim.

(We always advise that you discuss any finance option with your accountant)

Hire Purchase is an OWNERSHIP AGREEMENT - What does that mean? 

‘Ownership Agreement’ simply means: At the end of the agreement - Once you have paid EVERY payment - You Own the vehicle.

You don't have to hand it back or sell it on at the end of the agreement - It is now your vehicle to do with as you choose.

There are several adaptations of Hire Purchase:- Lease Purchase, Contract Purchase, Hire Purchase with a Balloon, Etc. 

If you are unsure of the agreement that you are quoted or offered, It is this simple:

With a Van or Commercial Vehicle - An Ownership Agreement: YOU WILL PAY ALL OF THE V.A.T AS A DEPOSIT. 

If the required or requested Deposit is less than the Total VAT Amount of the vehicle cost....It is NOT an Ownership Agreement. (*This could be potentially a Finance Lease - a Usership Agreement - You have to sell the vehicle at the end of the term)

(If V.A.T is charged on every payment (Rental) then it is NOT an ownership agreement)

Hire Purchase Agreements generally are for periods of 2 to 5 Years: Offering a FIXED MONTHLY PAYMENT for the duration of the agreement.

Most Hire Purchase Finance Providers will charge a ‘Finance Documentation Fee’ & ‘Option to Purchase Fee’

These fee’s can either be ‘Spread’ across the term of the agreement or be paid with the first monthly repayment & last monthly repayment.

You and your business take responsibility for the maintenance and general upkeep of the vehicle.

It is a requirement that the vehicle remains Legal, Road Taxed and Fully Comprehensively Insured for the duration of the agreement.

Are there any Tax Advantages to you and your business? 

There are several TAX advantages for Hire Purchase:

Annual Investment Allowance (AIA) being one of the main advantages: 

A commercial vehicle can be classed as 'Plant & Machinery' 

This offered you the option to offset up to 100% of your vehicle purchase cost against T.A.X in a 12 month period.

Annual Investment allowance is currently set at £250,000 - This will reduce significantly in 2016.

(*Speak with your accountant about this options and the TAX Advantages of purchase)

If you would like a quotation for your New Van - Please call: 01656 654 321

Vehicle finance for businesses is a complex area and recommending the correct funding solution will depend on many factors including:

•  Business Status
•  Cash Flow
•  Other Borrowings
•  Vehicle Usage
•  Suitability and Affordability

Application Process:

New Vehicle Solutions Limited will assist with calculating the amount of finance required to complete your vehicle acquisition. This calculation is likely to include the purchase price of the vehicle your are considering less any part exchange and or cash deposit 

As part of the loan approval process, personal details for each applicant will be passed to one or more Finance Companies. Typically the personal information required to assess your loan application will be as follows: 

• Full Name Date of Birth 
• The address(es) where you have lived for the last 3 years 
• Home Owners status - Owner / Tenant Telephone number(s) Employer(s) you have worked with for the last 3 years 
• Marital Status 
• Bank Account number and Sort Code
• Income and Expenditure information (Demonstrating Affordability)
• Supporting Financial Information and Documentation may sometimes be requested.

Credit searches will be undertaken with one or more Credit Reference Agencies 

In most scenarios, the Finance Company decision to accept / decline your loan application will be immediate although some applications might take longer to process 

Once accepted / declined New Vehicle Solutions will complete all necessary regulatory paperwork with you ensuring you have a clear understanding of the finance agreement you are entering into 

• A copy of each applicants Driving Licence (both parts) will be required to confirm your identity. You may also be asked to provide supplementary documentation as part of the approval process 

• Proof of comprehensive vehicle insurance may also be required Note: The Loan approval process for finance obtained via 3rd Party providers may vary from the steps outlined in this illustration

Within our organisation there are a number of finance options we are able to provide. Based on our discussions and your responses to our questions we will have narrowed down this selection to the one that may be most appropriate given your personal circumstances and requirements. We do however believe it is important that in making the decision you are aware of all finance options we have available (some of which may not be applicable in your particular circumstances) and have relevant information on the options available. Further information on the types of finance options we are able to offer can be obtained from organisations such as the Finance and Leasing Association www.FLA.org.uk or the Money Advice Service www.moneyadviceservice.org.uk

To ensure you get the very best advice, you should seek professional guidance from your accountant or a Business Finance Specialist.

Any agreement for vehicle funding will be completed without advice and based on your explicit instructions.

New Vehicle Solutions Ltd is authorised and regulated by the Financial Conduct Authority, our firm reference number for consumer credit is 685872 New Vehicle Solutions Ltd is an Appointed Representative of AutoProtect (MBI) Limited which is authorised and regulated by the Financial Conduct Authority for Insurance Mediation, their reference number is 312143. We are a credit broker and not a lender.

We are permitted to conduct Credit Brokering, Debt-Adjusting and Debt-Counselling in connection with the whole or partial settlement of credit agreements for vehicle finance and consumer hire agreements.

You can check this on the FCA Register by visiting the www.fca.org.uk or by contacting the FCA direct on 0300 500 8082

Company Registration Number: 8572112 – VAT Number: 166595858 Registered Office: New Vehicle Solutions Ltd, Tremains Road, Bridgend, CF311TZ

New Vehicle Solutions Limited does not and will not charge any fees for providing any Consumer Credit services. 

New Vehicle Solutions Limited  can introduce you to a number of finance providers, we may receive a remuneration if you enter into an agreement with them.

Calls may be recorded for training and monitoring purposes.

Last update: 18/12/2019