— BVRLA Guide to Vehicle Funding —
Budgeting An important advantage of contract hire is that it assists the user in fixing forward budgets. Contract hire rentals are fixed for the period of hire and future costs are thus easy to determine.
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Capital Allowances These allow a company to obtain a Corporation Tax deduction for the cost of certain qualifying business assets (ie vehicles). Company car (Benefit-in-kind) taxation Income tax assessed on employees who have the private use of a company-provided car. Tax is also payable where the employee receives free fuel for private purposes. Benefit-in-kind tax does not depend on the method of vehicle funding. Cash flow The movement of cash into and out of a business. Conditional sale A conditional sale is a purchase agreement between the finance company and the customer, where the customer agrees to buy the vehicle. The customer achieves ownership when certain conditions have been met. These are normally: ❱ All the regular payments have been met ❱ The goods are insured and in good condition ❱ Any balloon payment under the agreement has been paid by the customer
Contract hire One of the most common types of lease, also known as and usually accounted for as an operating lease. The contract hire company (the owner of the car) accepts responsibility at a fixed fee for depreciation, funding costs and administration. Contract hire is usually a fixed price service. The lease rental is split between the ‘finance’ element (payment for the use of 39