Bristol Street Commercials Guide to
Financing Your Next Vehicle

With so many options open to fund your next vehicle, what is the right option for YOU? From Contract Hire to Personal Contract Purchase let us help you find the deal that suits you and your budget.

So what are the differences?

Below is a guide to what each option involves:

Hire Purchase:

What is it?

Hired Purchase allows you to use the vehicle while paying for it, at the end of the agreement you take ownership. The vehicle is the security for the agreement.

Advantages of Hire Purchase:

Offers a good way to spread the cost of assets over a period of time

Documentation completion relatively simple and mostly organised by supplier

Payments are fixed to allow you to accurately budget your finances

Lease Purchase:

What is it?

Lease purchase is usually used by VAT registered businesses. Factors such as the vehicle cost, estimated future value and yearly mileage will be used to determine the monthly cost. At the end of the contracted period a payment equivalent to the estimated value is payable, upon this payment the vehicle’s ownership is transferred from the lessor (leasing company) to the lessee (you).

Advantages of Lease Purchase:

Lease purchase is usually a cheaper option than hire purchase

VAT recoverable if the vehicle is used 100% for business usage

Smaller front end deposit


Personal Leasing

What is it?

This is becoming an increasingly popular method of purchasing. This has two main financing options, Personal Contract Hire (PCH) or Personal Contract Purchase (PCP).

Personal Contract Hire

The idea is simple choose a vehicle, length of agreement and mileage, you pay a monthly sum over a set period usually 2 or 3 years and return the vehicle at the end of the agreement. This enables you to change your vehicle regularly and avoiding the costs of owning an older vehicle.

Advantages of Personal Contract Hire:

Small initial deposit

No risk from residual value loss

You can frequently change your vehicle

Road fund licence is included for the duration of the contract

Personal Contract Purchase

This is very similar to PCH, again having payments over a set period of time and set mileage. The main difference with this agreement is the inclusion of a final balloon payment. This allows you to purchase the vehicle at a price agreed at the beginning of the term. This payment is the minimum projected cost of the vehicle at the end of the agreed contract.
Advantages of Personal Contract Purchase:

Optional maintenance can be included within the contract further setting your monthly outgoings

Final balloon payment allows you to purchase the vehicle at the end of the agreement

Contract Hire

What is it?

Means taking control of a vehicle for a fixed period of time, you will pay a fixed monthly fee for the duration of the agreement and then return the vehicle at the end of the contract. The payments are calculated by looking at initial cost of the vehicle, projected annual mileage and depreciation of the vehicle, the payment is the difference between the initial cost and the final residual value of the vehicle, so the higher the residual the lower the payment!

Advantages of Contract Hire:

Service packages can be added to your agreement further fixing your monthly costs

VAT registered companies can reclaim 50% of the total payment

VAT registered companies can reclaim 100% of service packages

Hire rental tax allowances also apply

A new vehicle every few years

Easy disposal at the end of the agreement