If your company is fully or partially exempt from VAT or if you run a fleet of higher grade vehicles then Contract purchase should be considered as one of your options.
What is Business Contract Purchase?
Contract Purchase offers the facility to purchase your vehicles over a predetermined period of time and at fixed monthly costs, without taking the depreciation risks normally associated with ownership.
Our monthly payment takes into consideration the cost of the car, anticipated depreciation and mileage, as well as any service and maintenance options you wish to include.
The big difference between Contract Purchase and Contract Hire is that you have the opportunity to buy the vehicle at the end of the contract period. You can make a ‘balloon payment’ at the end of the contract which makes you the legal owner of the vehicle. Alternatively, you can simply return the vehicle to us.
Suitable For
- Cash rich organisations with no alternative usage plans for funds
Who:
- Are in standard VAT & ongoing Corporation Tax-paying situations where the retail value of a car exceeds £25,000
Or are:
- VAT exempt or Zero Rated
Main Features
- Contract period & mileage set to match client usage patterns
- One single payment on delivery covers the whole life vehicle cost
- Just depreciation – not the full cost of the vehicle – is included
- Interest cost is minimised – applied simply to residual value
- Fixed operating costs – resale value risks eliminated
- Can include full maintenance services
- Contract covers fixed period and mileage allowance
Balance Sheet
- On-Balance sheet funding
VAT Treatment
- No VAT on charged on the funding element of the rental
- VAT charged on the service element of the rental – fully reclaimable
Corporation Tax
- Writing down allowances spread over full period of contract & beyond
- 20% per annum on vehicles emitting less than 159 Co2
- 10% per annum on vehicles emitting more than 160 Co2
End Of Contract
- A final “balloon” rental is payable and:
Either – Vehicle retained by client
Excess mileage charges levied if contract mileage exceeded
Or – Vehicle collected & repurchased by ecofleet / supplier at “balloon” level
Excess mileage charges levied if contract mileage exceeded
Reinstatement charges made if unfair wear & tear evident
ecofleet Features
- Buying power ensures consistently keen pricing
- Cars delivered and collected FOC
- Servicing provided by client convenient agents
- Contracts regularly reviewed & amended to match mileage patterns
Is it right for you?
There are scenarios where Contract Purchase is the right funding option to choose. We’ll analyse your fleet profile and will help you identify the best solution for your business. Backed by pro-active customer service for you and your drivers, ecofleet can design and deliver a comprehensive company car policy that is effective and matches your strategic financial objectives.
All information provided on this site is for guidance only. We recommend that you seek professional advice from your accountant and tax office before making any decisions. eco fleet uk Ltd accepts no legal liability for the information given as it has been provided for illustration only. It is your responsibility to check the validity of this with the relevant authorities.
