AVC Asset Finance
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AVC Asset Finance

Information System - Contract Hire and Leasing Guide

  • Business Account Eligibility
    Business Account Eligibility

    Contract Hire and leasing agreements are underwritten by the financer (Contract Hire / Finance Company) as a credit facility for businesses (limited companies, sole traders, LLPs and PLCs).

    Account approval takes in to account the customer’s credit status and vehicle cost similar to that of normal vehicle finance, even though the vehicles is the property of the financer from the outset.

    Account approval can be applied for singular vehicle transactions, or for a credit facility to cover a multiple vehicle fleet. Account credit approval must be first agreed by the financer prior to vehicle order.

    All Vehicle Contracts Limited will always seek your written permission prior to forwarding your details to any of our approved vehicle funders. Our practise is to also only forward your details when a specific vehicle has been agreed, by way of our pre-contract order that clarifies yours or your company’s specific requirements.

    Contract hire and leasing agreements are available to businesses (Ltd companies, sole traders, LLPs and PLCs).
    So, let’s take a closer look what the criteria is and what is needed to be to be eligible to obtain credit acceptance for contract hire and leasing.

    Standard criteria for account acceptance

    Financers are responsible lenders that require financial information that demonstrates the customers affordability and ability to pay.  To demonstrate this, standard information that is usually required is business user or company details, with trading history of at least three years and up to date accounting information that is available or registered at Companies House.

    When not all our accounting information is available

    Management accounts and financial information such as business bank statements can be requested to display affordability in lieu of certified accounts. Director’s guarantors or higher initial payment may also be required in certain circumstances.

    Credit history criteria

    A standard credit check is carried out, usually through Experian or Equifax. County court or defaults usually mean automatic account rejection, but facilities may be considered by non-status contract hire funders.

    New business account applications

    All Vehicle Contracts like to help new business ventures to be considered, with business plan and financial information such as business bank statements to display affordability in lieu of certified accounts. Higher initial payments may also be required.

    Proofs of identity

    To avoid identity fraud, document signatories must provide proof with photo identity; this is a full UK driving licence with photo ID (an old-style licence must be accompanied with your passport).

  • Finance Lease

    Vehicle Finance leasing for business

    Leasing is not a new concept and exploded on to the scene as a method to finance railway stock in the 1800’s. Leasing is now corporate America's biggest external source of equipment finance that is used to fund everything from photo copiers to power plants, aircraft, helicopters, to offshore drilling rigs, telecom equipment and of course vehicles.

    Here in the U.K. leasing is a cost-effective option of acquiring a new vehicle, suitable for all types of small and large companies and partnerships that are VAT registered. Leasing in the U.K. is also a popular method of funding big ticket assets such as aircrafts and specialized commercial vehicles.

    If you fall into this category then vehicle leasing could be well worth your consideration. Vehicle lease agreements in the U.K. are popular for all vehicles, but in particular those that depreciate quickly, such as vans and hardworking commercial vehicles or high mileage cars.

    Lease agreements allow use of a vehicle without ownership, but still offers the return of all the asset value achieved from the sale, or the majority of the sale proceeds less a percentage to the finance companies in some instances.  

    Advantages of Finance lease
    • Affordable, fixed cost method of acquiring a new vehicle that can be tailored to suit your monthly budget and annual mileage, making budgeting easier and straightforward.
    • Fixed repayments over a period and on the exact vehicle that suits you.
    • Low initial outlay, contract hire allows you to choose your own initial payment and lease term which is usually between 24-60 months.
    • Savings for VAT registered customers - 50% of the VAT is reclaimable on the monthly rental, with 100% reclaimable on commercial vehicles.
    • Profit from the sale proceeds or the majority of the sale proceeds less a percentage to the finance companies in some instances.  
    • Easy accounting and tax effective method of vehicle funding. Vehicle lease payments are classed as rentals and can be offset against tax in full or part dependent on the vehicles use.
    • Finance companies (the lessor) offer beneficial rates to encourage lease transactions, as they benefit from written down allowances as the vehicle owners; this results in a low cost funding method. The customer (lessee) benefits from the tax benefits of a rental.
    • The finance company (the lessor) finances the vehicle less the VAT. This lowers the balance financed passing on a more cost effective monthly payment profile offering better cash flow and cost method of acquiring a new vehicle, that can be tailored to suit your monthly budget and annual mileage, making budgeting easier and straightforward. 50% of the VAT is reclaimable on the monthly rental, with 100% reclaimable on commercial vehicles.
    Jargon explained
    • Finance Lease - Finance Lease is usually subject to a Residual value, or sometimes referred to as a balloon payment, or final rental payment.
    • Residual Value - essentially this is a percentage of the total vehicle cost; this payment reduces monthly payment outflow and is structured so that the vehicle's value covers the residual value.

    Finance Lease agreements are not subject to mileage restrictions. The customer is referred to as the lessee and is responsible to the Finance Company, the Lessor, for the residual value amount. It is also usual to have a nominal residual value; this is classed as a fully amortized lease.

    The finance companies (Lessor) will only allow conservative residual values, to safe guard their asset and your interests, our systems offer pre-calculated final payments based on milleage inputted.

    What happens at the end of a Finance Lease?

    The customer, or lessee, arranges the sale of the vehicle on behalf of the finance company (the lessor), the owners of the vehicle.  The lessor arranges the invoice and receives the funds from the sale.

    Profit from the sale is refunded to the lessee classed as a refund of rentals, as per the terms of your agreement. If you part exchange the vehicle, it is normal for the dealer to complete the sales agreement direct with the finance company.

    If you want to keep the vehicle, the finance company (lessor) usually offer a peppercorn rental service; this is a nominal annual charge that is also treated as a tax deductible rental. 

    If your lease is subject to a residual where the vehicles value proves to be less than the final balloon payment, you as the customer (lessee) would be responsible for the short fall to the finance company (lessor).

    Contract Hire or Leasing - which is the correct terminology?

    Contract Hire may be referred to as Leasing, whilst this is a popular reference, a vehicle leasing agreement is not the same as Contract Hire, there are key differences.

    Vehicle Lease agreements in the U.K. are usually subject to a residual value, where the lessee - the person who leases the vehicle - is responsible to the Lessor - the owner (Finance Company) - for the residual value amount.

    Alternatively, there may be what is termed as fully amortized, which is where the asset value is written down to a nominal figure over the lease period.

    To make life as simple as possible, the All Vehicle Contracts website helps you choose and compare which vehicle and vehicle lease deal is right for you. Interactive quotation options and full vehicle comparisons, including whole life costs on virtually any make, model or manufacturer, are available for you to explore and compare on line.

  • Flexi Lease

    Flexi leasing for business

    Flexi lease is ideal for those that want a return of capital at lease end and cost effective motoring without mileage restrictions. Flexi lease attracts full fleet discounts making this method of funding for business users well worth considering.

    Flexi lease is also a good option for high mileage cars, commercials vehicles, and in particular specialist’s vehicles and those that are used for hard work that tests the vehicles depreciation curb over the lease period.

    Lease agreements allow use of a vehicle without ownership, but still offers the return of all the asset value achieved from the sale, or the majority of the sale proceeds less a percentage to the finance companies in some instances.  

    Advantages of Flexi Finance lease
    • Affordable, fixed cost method of acquiring a new vehicle that can be tailored to suit your monthly budget and annual mileage, making budgeting easier and straightforward.
    • Fixed repayments over a period and on the exact vehicle that suits you.
    • Low initial outlay, contract hire allows you to choose your own initial payment and lease term which is usually between 24-60 months.
    • Savings for VAT registered customers - 50% of the VAT is reclaimable on the monthly rental, with 100% reclaimable on commercial vehicles.
    • Profit from the sale proceeds or the majority of the sale proceeds less a percentage to the finance companies in some instances.  
    • Easy accounting and tax effective method of vehicle funding. Vehicle lease payments are classed as rentals and can be offset against tax in full or part dependent on the vehicles use.
    • Finance companies (the lessor) offer beneficial rates to encourage lease transactions, as they benefit from written down allowances as the vehicle owners; this results in a low cost funding method. The customer (lessee) benefits from the tax benefits of a rental.
    • The finance company (the lessor) finances the vehicle less the VAT. This lowers the balance financed passing on a more cost effective monthly payment profile offering better cash flow and cost method of acquiring a new vehicle, that can be tailored to suit your monthly budget and annual mileage, making budgeting easier and straightforward. 50% of the VAT is reclaimable on the monthly rental, with 100% reclaimable on commercial vehicles.
    Jargon explained
    • Flexi Lease No Residual Value 

      This is as a fully amortized lease. Which is where the asset value is written down to a nominal figure over the lease period. Full capital return, less nominal 2.5% from the profit achieved from the sale is refunded to the lessee classed as a refund of rentals, or as per the terms of your agreement.

    • Finance Lease agreements are not subject to mileage restrictions. The customer is referred to as the lessee and is responsible to the Finance Company, the Lessor, to ensure the vehicle sale is carried out as per the lease agreement.

     

    • What happens at the end of a Finance Lease?

    The customer, or lessee, arranges the sale of the vehicle on behalf of the finance company (the lessor), the owners of the vehicle.  The lessor arranges the invoice and receives the funds from the sale.

    Profit from the sale is refunded to the lessee classed as a refund of rentals, as per the terms of your agreement. If you part exchange the vehicle, it is normal for the dealer to complete the sales agreement direct with the finance company.

    If you want to keep the vehicle, the finance company (lessor) usually offer a peppercorn rental service; this is a nominal annual charge that is also treated as a tax deductible rental. 

    Contract Hire or Leasing - which is the correct terminology?

    Contract Hire may be referred to as Leasing, whilst this is a popular reference, a vehicle leasing agreement is not the same as Contract Hire, there are key differences.

    Vehicle Lease agreements in the U.K. are usually subject to a residual value, where the lessee - the person who leases the vehicle - is responsible to the Lessor - the owner (Finance Company) - for the residual value amount.

    Alternatively, there may be what is termed as fully amortized, which is where the asset value is written down to a nominal figure over the lease period.

    To make life as simple as possible, the All Vehicle Contracts website helps you choose and compare which vehicle and vehicle lease deal is right for you. Interactive quotation options and full vehicle comparisons, on virtually any make, model or manufacturer, are available for you to explore and compare on line.

  • Lease Purchase

    Lease Purchase (Hire Purchase)

    Hire Purchase or Lease Purchase finance agreements are the same, the difference being is that lease purchase can offer lower monthly payments by incorporating a final payment (sometimes referred to as a balloon payment); this figure is one larger payment due at the end of the lease purchase agreement.  The purpose of setting this figure is to reduce monthly payments compared to that of normal hire purchase. The agreement will either be Regulated or Unregulated under the Consumer Credit Act.

    Lower monthly payments are achieved by financing the vehicle and deferring an acceptable minimum future value or deprecation element of the vehicle as one payment payable at the end of the term. This payment is paid for from the negotiated sale of the vehicle, or you have the option to purchase the vehicle for the pre-set balloon payment, or final payment. Lease purchase final payments are not guaranteed, so in the event of there being a shortfall from the sale of the vehicle, it would be the responsibility of the customer to make good of any shortfall below the pre-set final payment. Therefore, it is important that you are comfortable with the terms and conditions of the agreement, and that any final payment (balloon payments) set are realistic to that of your planned vehicle mileage, and vehicle use from the outset.

    To make life as simple as possible, the All Vehicle Contracts website helps you choose and compare which vehicle and lease purchase or hire purchase agreement is right for you. Interactive quotation options and full vehicle comparisons,  on virtually any make, model or manufacturer, are available for you to explore and compare online.

    So why choose  Hire Purchase?
    • Hire purchase - this has always been one the most popular forms of vehicle financing and it is normally a fixed cost, fixed period loan of money that is linked (or secured) to the purchase of a vehicle. With hire purchase, you finance the balance of the vehicle, less deposit so although monthly payments are higher than that of a lease purchase or PCP, you own the full vehicle asset value at the close of the agreement. It is also easier to settle your agreement earlier, because the reducing balance outstanding would be lower than that of lease purchase or PCP with a final rental or guaranteed future value. 
    So why choose  Lease Purchase?
    • Lease purchase - vehicle financing is normally a fixed cost, fixed period loan of money that is linked (or secured) to the purchase of a vehicle. Lease purchase can be structured to offer lower monthly payments by incorporating a final payment or sometimes referred to as a balloon payment; this figure is one larger payment due at the end of the lease purchase agreement.  This can prove to be a big advantage to those working on monthly out flow budgets, and if structured correctly can also leave a cash balance in the customers favour at the close of the agreement.
    What are the options at the end of the Hire purchase agreement?
    • If your agreement is hire purchase, not lease purchase, there may be a nominal option of a purchase fee for you to gain title ownership; if applicable, this will documented on your agreement.
    What are the options at the end of the Lease Purchase agreement?
    • If you have opted for lease purchase with a final payment (or balloon payment as sometimes referred to), these are usually calculated to be below the anticipated vehicle resale value.
    • Your options are to arrange to sell or part exchange the vehicle at the close of your contract, and the figure gained over and above the final rental (balloon payment) value will be yours to put towards your next car, that may assist you in entering into an agreement for your new car without recourse to your own funds.
    • If there is loss from the sale you will be liable for the shortfall under the terms of your agreement. Purchasing the vehicle at the close of your contract for the final rental (balloon payment) may attract an option to purchase fee; if applicable, this will documented on your agreement.
    What happens if I want to end the Lease Purchase/Hire Purchase agreement?

    The agreement will either be Regulated or Unregulated under the Consumer Credit Act, and your rights are unaffected.

    Early settlement terms and conditions are detailed on the agreement, the early settlement calculations are calculated by the relevant finance company that refer to rule 78, commonly used by most finance companies.

    You may settle the agreement at any time if the balance outstanding, including any balloon payment (if relevant) paid to the lender. The lender may allow the customer a rebate of the interest remaining on the agreement. However, if the agreement is regulated under the Consumer Credit Act, the minimum amount of rebate is laid down by law.

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