Van Hire Purchase is a funding scheme aimed at both business and or personal users. Hire Purchase enables you to spread the payments over a period of between 24 and 60 months, you may also chose the option of having a ‘balloon payment’ (a deferred amount that you pay at the end of the agreement – keeps the monthly payments more affordable. Once all payments have been made the vehicle is owned by you and you can decide if you want to keep, sell, part exchange for another or ‘refinance’
Hire Purchase is an agreement between the business or personal user and the van Hire Purchase company, all van hire purchase agreements are subject to a credit search.
One of the main reasons van hire purchase is so desirable is that you can change your van for a new one without the large outlay of a big deposit. Most ‘deposits’ or ‘initial payments’ can be as little as 1 month’s payment, however the whole of the VAT should be paid at this stage also, if you are VAT registered you can claim 100% of the VAT back in your next VAT quarter.
The way van Hire Purchase works:
If you chose to have a ‘balloon payment’ you would state the expected annual mileage at the start of your agreement, the van hire purchase company would then calculate the expected ‘residual’ value of the van at the end of the agreement. This value is then deducted of the total amount payable and the remaining figure is divided by the amount of months you have decided to pay the balance over, if you don’t opt for a ‘balloon payment’ the total amount payable (including option to purchase fees and interest charges – which a proportion can be claimed back) is divided over the amount of months you have decided to pay over.
Once all payments have been made, including any option to purchase fees/balloon payments, you won the van outright.
You can change/settle the agreement at any time during the period by simply obtaining a ‘settlement figure’ and then paying this to the finance company, once done so you can then sell the van.
Advantages of a Hire Purchase agreement:
1.VAT as deposits (100% Reclaimable if you are VAT registered)
2.Contracts that can run 24 months to 60 months
3.Bolt on Maintenance & Service packages – these include all servicing (in accordance with manufactures guidelines), tyres, batteries, exhausts and basically anything that is not covered under the warranty
4.No annual mileage limitations
5.No wear and tear charges
6.Ability to ‘reclaim’ a proportion of the interest charges.
7.Show the van on your ‘balance sheet with full write down allowances, on a reducing balance, (ask your accountant/book keeper for details)
8.Ability to change your van on a regular basis.
9.Easier to obtain credit than on other finance agreements like Contract hire