Understanding the complexities of leasing agreements can be a taxing experience even for the most niblest of minds. Which options would be the best? Would you be wiser enter into a straight rental agreement?

Hire purchase

When you take out a hire purchase agreement, you will be paying a deposit equivalent to 3 months of the overall rental in advance plus VAT. The periods of payment can vary between 36 and 60 months at the limit. Your monthly payments will be exempt from VAT and your initial deposit charge can be reclaimed. One other point in its favour is the ability to offset any taxable profit – which is a good boost for any small business. At the end of the lease agreement, the van is legally yours and you are not required to make any more payments.

Finance Lease

When you take out a finance lease agreement, you will be paying a deposit of 1 to 3 months of the overall rental in advance plus VAT. Similar to the hire purchase agreement, your repayments are usually between 36 and 60 months in total. If you can claim back your VAT on the deposit, you will have a restriction of a quarterly claim only. One aspect that is appealing – if the van is sold or part-exchanged at the end of the agreement – 96% of the value is kept by the hirer.

Contract Hire

Many aspects of this type of arrangement are the same as the finance lease, with the added bonus of a maintenance package. There is also no hassle of having to sell the van at the end of the agreement. It is also known as an Operating lease within the business. Most of the criteria is the same as above including the cost of the deposit, and the recoverability of the VAT etc. So long as you stay within your agreed mileage, you can fix your costs and retain budgetary control of your agreement.

Lease Purchase

Most of the details are the same as the finance lease agreement. Where van lease differs, is at the end – you sell the vehicle to a third party for a reasonable value and buy it back for £1. Forward an invoice to the finance company with a cheque for 5% of the sale. After writing down 100% of the cost of the deal, you are then able to keep the van.

Citroen van leasing Is just another of the many options that are available to choose from.

 

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