An Introduction to Car Finance
When it comes to vehicle finance, understanding the financial implications not only monthly, but taking into account other factors such as company car tax, early termination, and equity or loss at the end of the agreement, can all be a little confusing without expert guidance.
That's where CVC comes in. As a family-run business since 1996, Daniel and Bradley have been partnering with clients in Essex and throughout the UK to help them secure vehicle finance options that suit their needs and give them the best chance of achieving their financial objectives.
We provide more than just a finance brokerage, we offer a comprehensive range of services, including part exchange, and free of charge support and advice before, during and after your agreement with us. We make the process of selecting a new vehicle seamless and hassle-free. Supporting you every step of the way. We appreciate that not everyone understands the different types of finance available, so, in this handy guide, we’ll be discussing car finance in a little more detail.
What do I need to consider when thinking about car finance?
Before we get going, there are a few things you need to think about before deciding which car finance option is right for you.
• Ownership preference - Do you want to own the vehicle at the end of the finance agreement, or are you more interested in a rental agreement for a specific period and returning it afterwards?
• Monthly Budget: It’s important to properly assess your financial situation and determine how much you can comfortably afford to pay each month. Consider maintenance and tyre costs, all of which can be included in your monthly payment plan.
• Mileage and Vehicle Usage: Consider your anticipated mileage and vehicle usage. Some finance agreements have mileage restrictions, and exceeding those limits may incur additional charges.
• Future Plans: Think about your future plans with the vehicle. Are you confident you can commit to a lengthy contract, or would you like to be able to have as much flexibility as possible to end your agreement early.
What are the different types of finance?
We offer all forms of vehicle finance, each with its own financial and tax implications, especially for businesses. Whether you're an individual or a business owner, choosing the right finance option is crucial to ensure monthly affordability and maximise benefits. Let's explore the two most common categories of vehicle finance: purchase agreements and rental agreements.
If you're looking for the option to own the vehicle, Personal Contract Purchase (PCP)or Business Contract Purchase (BCP) are both great options to consider.
PCP and BCP
If you are looking for a way to finance your next vehicle that gives you the option to return your vehicle at the end of contract or perhaps part exchangeit if the value is higher than the option to purchase fee, then PCP and BCP offer just that, subject to terms and conditions. However, it's worth noting that VAT-registered businesses may find Business Contract Purchase less suitable, as VAT cannot be reclaimed except with commercial vehicles.
Hire Purchase or Lease Purchase
Another ownership option is Hire Purchase or Lease Purchase. With these options, you make monthly payments to gradually pay off the value of the vehicle over a set term, eventually owning it. Lease Purchase allows for lower monthly payments by deferring a portion of the loan to the end of the agreement, commonly referred to as a balloon payment.
For a fixed cost, easy-to-budget payment, Contract Hire is a great choice for both business and personal use. With Contract Hire, you pay fixed monthly amounts for a predetermined period, returning the vehicle at the end of the agreement.
As this is a rental agreement, up to 100% of the rental can be off-set against tax dependant on the Co2 emission. Proportional VAT can also be reclaimed for a business registered on the normal VAT scheme.
Clients enjoy the option of including maintenance and tyres which avoids any inflation on servicing costs during the term of their agreement.
Finance Lease is an option that offers businesses the same tax treatment as contract hire. However, there is a final payment responsibility for the hirer. The vehicle must be sold to a third party, with the hirer retaining a majority percentage of the profits. In cases where the value of the vehicle is lower than the final payment, the hirer is still responsible for paying it, potentially resulting in a loss. This scenario is uncommon unless the mileage has significantly exceeded the contracted limit, or the vehicle is in poor condition.
How do I know if I’m eligible for personal vehicle finance?
To be eligible for personal finance, customers must have a clean credit record and be over 18 years old.
• Proof of ID
• Proof of address
• Proof of earnings and employment status
• A full driving licence
• And possibly a guarantor, depending on your lender.
How do I know if I am eligible for business vehicle finance?
For businesses, eligibility is assessed based on profitability and credit history of the business. Whilst we generally require at least two years of filed accounts for limited companies, we will also consider new start-up businesses, albeit with lower lending amounts, higher initial payments, and directors' guarantees.
How does vehicle financing work?
At CVC, we understand the importance of finding the right deal. With our extensive experience and expertise in the industry, we’re here to guide you through the process to ensure you make an informed decision. Bradley and Daniel are dedicated to providing trustworthy advice and helping you secure the best vehicle finance options available in the UK.
Whether you're a private customer looking for personal car finance or a business owner seeking suitable options for your company's fleet, CVC has got you covered. Our services go beyond financing, including part exchange, to make the car buying experience convenient and hassle-free.
Each client has different needs and objectives. Contract hire for example may be the perfect solution for one business, but another may find it not suitable. Many companies who run vans for example often are better suited to Finance Lease as they prefer to be less restricted on mileage and condition and take their chances with disposal. Vehicle choice can have a massive impact on company car tax for the company car driver. Take advantage of our free advice to help avoid costly mistakes.
Private individuals may be drawn to a cheap monthly rental with contract hire, but perhaps they would prefer a potentially less significant early termination charge and the possibility of gaining equity that Personal Contract Purchase gives.
If you’ve still got questions, or you’d like to know how we can help you – contact us today. Trust CVC for Your Vehicle Financing Needs in Essex and throughout the UK!