Other Finance Options

Finance Lease Explained

What is finance lease?

Finance lease is a popular agreement for businesses needing cars, vans and commercial vehicles where contract hire is not suitable. It offers flexibility and tax advantages to eligible companies who require one or more vehicles but don’t have the accessible funds to pay for them up front.

As part of a finance lease agreement you can choose to pay either the entire cost of the vehicle, including interest charges, over an agreed period. Alternatively, you can opt to pay lower monthly rentals with a final payment based on the anticipated resale value of the vehicle (otherwise known as the ‘balloon payment’). Throughout the agreement, the vehicle remains the property of the leasing company.

This type of agreement is only available to business customers – including limited companies, self-employed people and sole traders; it is not available to private individuals. It is a particularly popular option for businesses because of the significant tax advantages (continue reading for more information on this).

How could it work for your business?

If your company chooses to take out a finance lease on a brand-new vehicle, you will be hiring it for a specified period of time (two or three years, for example) and make regular monthly payments to rent it.

Your business will be able to use the car or van without facing the high upfront cost of a new vehicle, handle the administration of the vehicle, and have the assets show on your company’s balance sheet.

At the beginning of the lease, usage parameters for the vehicle are agreed. Providing these restrictions are met, monthly payments and interest rates are fixed for the duration of the contract.

If yours is a VAT registered company, you can reclaim between 50% and 100% of the VAT payments depending on whether you are renting a car or commercial vehicle. If your company is not VAT registered, you can choose to spread the VAT costs across the term of the lease by incorporating it into your monthly rental.

Your payments can normally be offset against taxable profits (special rules apply to cars)

At the end of the contract the vehicle can either be sold by the user to an unrelated third party (some funders may handle the disposal in return for a small commission) or alternatively, the user can pay the outstanding “balloon payment” and operate the vehicle under a peppercorn agreement.

The key features of finance lease

  • Popular for business and commercial customers when contract hire is not suitable
  • Allows your company to handle the administration of your vehicles, and have the assets show on your balance sheet
  • Choose to pay the entire cost of the vehicle, including any interest charges, on a monthly basis or
  • Pay lower monthly instalments with a final payment based on the resale value of the vehicle at the end
  • At the end of the agreement, the vehicle is either sold to a third party or
  • Pay the outstanding balloon payment and operate the vehicle under a peppercorn agreement

The key benefits of finance leasing

  • Fixed payments for the whole agreement
  • Low up-front costs – for just a small outlay, you can use the assets immediately
  • Claim up to 50% of the VAT on cars and 100% on commercial vehicles (subject to being VAT registered)
  • Flexible repayment structure tailored to match your company’s cash flow
  • Fixed or variable interest options – you decide which suits you best
  • Tax advantages – VAT is payable on the rentals, not the purchase price, while payments can normally be offset against taxable profit (special rules apply to cars)
  • No penalty charges for additional mileage or damage at the end of the agreement
  • Although you will not own the vehicle, you will receive 98% of the sale proceeds if the vehicle is sold to a third party at the end of the agreement

What happens at the end of the contract?

At the end of the lease, the vehicle can be sold to a third party, allowing your company to benefit from any available equity if it is sold for profit. If the sale price is below the agreed residual value, you will be liable to make a further payment to the finance company.

Lease Purchase Explained

What is business lease purchase?

Lease purchase contracts is available to business customers. It is an agreement designed to offer dedicated vehicle funding if your company eventually wishes to buy the vehicle but doesn’t want to spend the money up front.

Lease purchase is purely a finance package and does not include maintenance or other added-value services, such as those offered with a contract purchase agreement.

NB: Motion Vehicles are specialists in Contract Hire and Personal Contract Hire agreements. While Business Lease Purchase agreements are no longer available with Motion Vehicles, it is important that you review the benefits and exclusions of every lease contract to better understand which agreement is best suited to your needs.

How could it work for your business?

As part of a lease purchase agreement, you will pay an initial deposit and then a series of monthly payments until the end of the agreed contract length. The initial deposit and monthly payments are worked out using the retail value of the brand-new vehicle, the length of contract (two or four years, for example), and the estimated residual value of the vehicle at the end of the contract.

It is worth noting that other types of business leasing contracts, such as contract hire, and finance lease are often more popular and common than lease purchase. This is because they offer more flexibility at the end of contract term than a lease purchase agreement.

The key features of business lease purchase?

  • Pure finance package – no maintenance packages or other services are included
  • The vehicle will belong to your company once the lease purchase agreement has begun
  • The slower a vehicle’s value depreciates, the better deal you will be able to get, as it is you who takes on the residual value
  • The car or van is paid for via an initial deposit, low monthly payments, and a final balloon payment
  • The vehicle must be purchased at the end of the agreement
  • The key benefits of business lease purchase?
  • Your company will own the vehicle once the final balloon payment has been made
  • Vehicle will be retained as a company asset
  • Low deposit and monthly payments, freeing up company money
  • Monthly payments are not subject to VAT
  • The vehicle can appear as a balance sheet item; the value of it can be written down against taxable profits
  • The vehicle is registered in the name of your company
  • Considerations for business lease purchase?
  • The balloon payment must be paid for at the end of the contract
  • In some cases, the balloon can be higher than its value at the end of the contract
  • Vehicle must be insured with full comprehensive cover

Personal Contract Purchase Explained

What is personal contract purchase (PCP)?

Personal contract purchase (PCP) is a vehicle finance agreement available to individuals (i.e. not businesses). After an initial deposit and a series of monthly payments which effectively cover the vehicle’s depreciation, this type of lease gives you the option to purchase the vehicle or return it to the finance company at the end of the agreement.

With PCP, the monthly finance payments are not subject to VAT, although if an optional service package is taken, VAT is payable on the service costs.

How could it work for you?

If you lease a car on a PCP basis, you will be required to pay an initial deposit, followed by a series of monthly payments for the duration of your agreement – 24 or 48 months, for example. These monthly payments effectively cover the vehicle’s depreciation. As such, when your agreement comes to an end, there is still an outstanding amount of money due to be paid – known as the balloon payment. You can either choose to pay this amount and own the vehicle, or not pay it and return the vehicle to the lease company.

At the start of your contract, an agreement will be made as to what the car will be worth at the end of the contract – the minimum guaranteed future value (or MGFV) – otherwise known as the balloon. The monthly payments are the cost of the vehicle after the MGFV and the value of your deposit have been deducted.

It is worth noting that personal contract hire is often more popular and common than personal contract purchase. This is because they offer more flexibility at the end of contract term than a personal contract purchase agreement.

If you’ve got further questions about which type of lease contract is best for you, take a look at the information we’ve provided on each of the different contracts. Alternatively, give our team a call on 01332 300 044.

The key features of personal contract purchase

  • A minimum guaranteed future value (MGFV) – or balloon payment – is agreed at the start of the contract
  • Fixed monthly payments cover the rental of the vehicle, plus any maintenance options if chosen, throughout the duration of the contract
  • The monthly payments are calculated by taking the following into consideration:
  • The cost of the vehicle
  • The contract period
  • Agreed residual value to be paid at the end of the agreement
  • Mileage allowance (as chosen by you before the start of your contract)
  • Any additional options, such as a maintenance package
  • At the end of agreement, when all payments have been made, ownership passes to the customer – if you choose to not return the car
  • Vehicle tax is provided for the first 12 months of the contract

The key benefits of PCP

  • Low initial rental
  • Fixed rentals for the whole package, making budget planning easier
  • Flexible terms to meet your personal finance requirements and driving habits – with variable contract duration and mileage terms
  • Maintenance of vehicles can be included in the monthly fees, spreading the cost
  • The finance company guarantees the resale value of the vehicle at the end of the agreement for a known and fixed amount – no risk of negative equity
  • Ownership passes to you at the end of the agreement, if you choose it to, once all payments have been made
  • Allows you to drive the car of your choice without the risk – if you’re happy with the vehicle at the end of your contract, you can choose to keep it. If not, or there’s another car you’d like to try for a few years instead, you can simply hand the vehicle back

What happens at the end of the contract?

At the end of the contract, you have three options:

  • Hand the vehicle back to the leasing company (and therefore do not pay the balloon payment)
  • Pay the balloon payment outright and own the vehicle
  • Refinance the final rental amount if applicable, subject to credit – that means pay the balloon payment in monthly instalments. At the end of these payments, you own the vehicle

You do not need to decide which option is best for you until towards the end of your contract.

We offer a huge range of brand-new cars available to lease. Visit our homepage to search our catalogue, or check out our latest offers.

NB: Motion Vehicles are specialists in Contract Hire and Personal Contract Hire agreements. While Personal Contract Purchase agreements are no longer available with Motion Vehicles, it is important that you review the benefits and exclusions of every lease contract to better understand which agreement is best suited to your needs.

Personal Lease Purchase Explained

What is personal lease purchase?

If you take out a lease purchase agreement on a new car, you agree from the outset that at the end of the contract, you will purchase the vehicle. It enables you to eventually buy a new car, without having to find the entire amount up front.

Where lease purchase differs is that it is a pure finance agreement. It does not include maintenance or any other added-value services, such as those offered with a PCP agreement.

NB: Motion Vehicles are specialists in Contract Hire and Personal Contract Hire agreements. While Personal Lease Purchase agreements are no longer available with Motion Vehicles, it is important that you review the benefits and exclusions of every lease contract to better understand which agreement is best suited to your needs.

How could it work for you?

As with many other leasing agreements, you will pay an initial deposit followed by a series of monthly payments, and then pay a ‘balloon payment’ at the end of the contract to own the vehicle. The monthly payments over a period of two, three or four years, for example, are worked out using the retail value of the brand-new vehicle, the length of contract and the estimated residual value of the vehicle at the end of the contract.

Lease purchase is often a popular option with people who know what vehicle they want to eventually purchase but can’t access sufficient funds to pay for the new car outright upfront.

It is worth noting that personal contract hire is often more popular and common than personal lease purchase. This is because it offers more flexibility at the end of contract term than a personal lease purchase agreement.

If you’ve got further questions about which type of lease contract is best for you, take a look at the information we’ve provided on each of the different contracts. Alternatively, give our team a call on 01332 300 044.

The key features of personal lease purchase

  • Pure finance package – no maintenance packages or other services are included
  • The vehicle is paid for via an initial deposit, low monthly payments and a final balloon payment at the end of the agreement
  • The vehicle must be purchased at the end of the agreement – you agree to take ownership at the beginning of the contract

The key benefits of personal lease purchase

  • Monthly payments are not subject to VAT
  • You will own the vehicle once the final balloon payment has been made
  • Low deposit and monthly payments, making budget planning easier

What happens at the end of the contract?

When your lease purchase agreement reaches the end of its term, you must take ownership of the vehicle. There is no option to return it. You’ll be required to pay the final balloon payment, and then the car will be yours. You will no longer have any obligations to the leasing company.

Frequently asked vehicle leasing questions

We have listed some of the most commonly asked questions about personal and business leasing and contract hire, all of which can be found below. If you can't find the answer you are looking for, then why not get in touch and speak to a member of our sales team on 01332 300 044.

All of the lease vehicles that we source are brand new and supplied through vehicle manufacturers or UK franchised dealerships.

Yes, all our vehicles that are supplied to you will come with full UK manufacturer’s warranty. Each manufacturer sets its own warranty length, so it is advised to speak to a member of our sales team to discuss the warranty details for your chosen vehicle.

An initial payment is typically a payment of 3 regular monthly rentals made payable in advance. Larger initial payments can be made if desired, for example 6 regular payments. This will in turn lower the regular monthly rentals throughout the duration of the contract.

Maintenance is not included in all our lease contracts. If maintenance is included it will be clearly stated on our website. However, if you require maintenance, you can add this on to your lease package for an extra monthly cost. All our maintenance packages include servicing, exhaust, tyres, brakes, battery and labour. For more information, please go to the maintenance section of our website.

Yes, road fund licence (road tax) is included for either 12 months or for the duration of the contract depending upon the type of lease agreement taken out.

If you have taken out a personal or business contract hire agreement, your road fund licence will be provided to you for the duration of the contract by the funder. This is because the funder is the registered keeper of the vehicle.

If you have taken out a contract purchase, personal contract purchase, finance lease, lease purchase, business or personal operating lease, the funder will only provide you with road fund licence for the first 12 months as you are the registered owner of the vehicle.

Yes, every contract lease deal that we source comes with either 12 months or 3 years breakdown recovery, depending upon the manufacturer of your vehicle. If you would like confirmation about roadside assistance, please call 01332 300 044 and speak to a member of our sales team.

All your monthly rentals are collected by direct debit by the finance funder who you have taken your lease agreement out with and not Motion Vehicles.

If you are leasing a vehicle for business purposes and your business is VAT-registered, then you can reclaim 50% of the total payments made. If maintenance is included within your lease agreement, you will also be able to claim back 100% of the maintenance costs.

Any business customers who are not VAT-registered such as sole-traders, will not be able to claim back VAT or maintenance costs.

You can generally recover the VAT on all other business motoring expenses like fleet management or off-street-parking. There are specials rules for reclaiming VAT on road fuel used for business purposes, so it is advised to speak to your accountant for more information.

Below is a link to the HM Revenue & Customs website which provides a company car and car benefit calculator to calculate how much company car tax you will pay.
Company car and car fuel benefit calculator: http://cccfcalculator.hmrc.gov.uk/CCF0.aspx

No, we offer free UK mainland delivery and collection for all our customers.

Once you have chosen a vehicle, contract type, advanced rental and annual mileage, you will receive a written quotation from a member of our sales team. The quotation will detail your chosen parameters and will confirm your monthly rental.

If you are happy with the quotation, you will be asked to fill out a credit proposal form, which will be used to gain credit from the finance company for the vehicle you wish to lease.

Once approved for credit, a vehicle order form will be produced and will need to be signed by yourself and returned to us. This form will confirm your quotation, vehicle details, colour, options and approximate lead time for the vehicle. Following its return, we will send the order form to the dealership involve to either secure your vehicle if in stock or to initiate the factory order.

Finance documents will then be produced by our admin department, sent to you, where you will need to read, sign and sent back to us along with your administration fee payment. From here, you will simply wait for you vehicle to be delivered.

For a more detailed step-by-step guide to the leasing process, visit our how leasing works section.

If you would like to discuss mileage amendments, extensions or update your personal details during your contract, please contact our customer service team who will be able to assist you. You can reach our customer service team by calling 01332 300 044.

All you need to do is simply hand your vehicle back where you will have no further obligations. Upon collection, please ensure that the vehicle is in a reasonable condition. If it's not, you will be charged for any damage.

No, insurance is not included within your monthly rental. It is your responsibility to insure the vehicle you lease for the duration of your agreement.

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