About Leasing

At Pentagon we offer a wide range of finance and leasing options to make it easy for you to drive the new or used car or commercial vehicle you really want. We’ve put together a simple guide to how each of these options works and what benefits they offer to both business and private customers.

Features At A Glance

Contract Purchase (Low payment Plan or PCP)

In Brief – With a Contract Purchase Plan you normally make lower fixed payments every month than you would with other options and the future value of your vehicle is guaranteed.

How It Works - Simply choose the vehicle you wish to purchase and what deposit you want to pay. Then you estimate what your annual mileage will be and decide on how long you want to keep the vehicle.

Based on your chosen vehicle, the contract term and the estimated mileage we will then calculate the Guaranteed Minimum Future Value (GMFV) of your vehicle at the end of your agreement. The GMFV is deferred to the end of the agreement and is the optional final payment.

Because the GMFV and the initial deposit are deducted from the price of the vehicle you then make what will generally be lower monthly payments based on the remaining balance plus the agreement interest.

At the end of the agreement, you have 3 choices:

1. Choose another vehicle and use any excess value over the GMFV towards your deposit. You can trade in your old vehicle or choose to sell it privately.
2. If you want to keep the vehicle, you only need pay the GMFV and it’s yours.
3. Simply return your vehicle in a reasonable condition and within the agreed mileage.

Benefits (Including benefits for business)

• Fixed payments allows for sensible budgeting
• Your monthly payments are generally lower than they would be using other finance plans because the GMFV is deferred.
• Because the vehicle has a Guaranteed Minimum Future Value you are protected against any future fall in used vehicle values
• You choose the deposit, annual mileage and agreement term to suit you.
• Business Benefit - Interest charges are allowable against tax
• Business Benefit - A proportion of the vehicles value can be written down against your businesses profits because it is an asset on your balance sheet (CO2 based).

Hire Purchase (Traditional Finance)

In Brief – Choose this and you’ll benefit from a regular payment structure with outright ownership of your vehicle at the end of the term.

How It Works - Hire Purchase finance tends to suit the buyer who intends on keeping the vehicle for longer than the term of the loan. Your deposit is deducted from the total cash price of the vehicle to give a balance that requires financing. Interest is then added and the total of the balance and interest is then repaid in equal installments throughout the life of the loan via monthly repayments, usually over a 1, 2, 3, 4 or 5-year agreement (whichever you prefer). This is the simplest and most popular method of buying a vehicle with finance. After you've made your final payment at the end of your agreement, the car is yours.

Benefits (Including benefits for business)

• Fixed regular repayments
• At the beginning of the agreement, both the amount you will pay every month and the repayment period and interest rate is fixed and will not change.
• Even if other interest rates go up, the interest rate on your finance repayments will not be affected.
• Choose the length of the repayment period to suit your budget. You can choose between 12 and 60 months, it's entirely up to you.
• Low or no deposit.
• At the end of the agreement you own the vehicle.
• Business Benefit – Interest charges are allowable against tax.
• Business Benefit - A proportion of the vehicles value can be written down against your business’s profits because it is an asset on your balance sheet (CO2 based).

If you have any questions about any of our financial services please contact your local dealership where a business funding specialist will be happy to explore the best options for your circumstances.

Contract Hire

In Brief - It is an efficient way of funding the use of a vehicle without the cost of ownership. You benefit from being able to choose a low initial deposit, regular fixed monthly rentals and no worries about what to do with your vehicle at the end of the contract.

How It Works – Contract Hire for business is a tax efficient way of funding a business vehicle. This is because the monthly payments can be offset against taxable profits. The amount that can be offset is dependant upon the new retail price of the vehicle (please contact us for further details).

If your business is VAT registered, 100% of the VAT payable on the finance element of the monthly payments can be recovered where the vehicle is either a van or a car used solely for business purposes. Where the vehicle is a car used for business and private mileage, then only 50% of the VAT payable on the finance may be recovered.

You can also include a maintenance package within the monthly payments. This covers regular servicing costs and can also cover the costs of general wear and tear.

Benefits

• You choose the vehicle you wish to drive, agree your annual mileage and decide your hire period of between 24 and 60 months.
• Payments are lower as they are calculated on the VAT exclusive price of the car
• VAT registered businesses can reclaim a portion of the VAT paid on rentals, and all of the VAT paid on optional maintenance rentals
• Low initial outlay and regular rentals for easy budgeting
• Road Fund Licence is included for the duration of the contract
• By adding an optional maintenance package you can combine all your running costs together in a single monthly payment
• No worries about the possible future value of the vehicle as you simply hand it back at the end of the contract.

Private drivers can also benefit from a contact hire vehicle. The advantages are that once the driver has agreed an initial deposit and the monthly installments the only extra they have to pay for is the fuel and vehicle insurance. Regular maintenance can also be included in the monthly payment. At the end of the agreement they simply hand the vehicle back. Customers also benefit because the finance is charged on the VAT exclusive price of new and qualifying used cars.

If you have any questions about any of our financial services please contact your local dealership where a business funding specialist will be happy to explore the best options for your circumstances.

Finance Lease

In Brief – If your business is looking for a flexible way to finance a vehicle that combines a minimum initial outlay with maximum tax efficiency then this could be your best option.

How it works - Although the business will never actually own the vehicle, finance leasing allows many of the benefits associated with ownership available to the business while at the same time offering significant tax advantages.

You choose the term and the deposit and your monthly payments are then calculated based on the VAT exclusive price of the vehicle you want. During the agreement period 100% of the VAT payable on the finance element of the monthly payments may be recovered (assuming the business is registered for VAT) where the vehicle is either a van or a car used solely for business purposes. Where the vehicle is a car used for business and private mileage only 50% of the VAT payable on the finance may be recovered.

For the duration of the agreement the vehicle will be shown as a 'leased asset' within your balance sheet. The monthly payments are treated as a revenue expense and so can be offset against any taxable profits. Furthermore, the monthly payments can be tailored to match the cash flow of the business, with a “balloon” rental being used to defer part of the vehicles initial cost.

At the end of the agreement period, the vehicle is normally sold and the proceeds used to pay off the “balloon” payment that was agreed at the outset. If, following the sale there is a shortfall, then the lessee must make up the shortfall. If, however the amount raised from the sale of the vehicle exceeds the “balloon” amount then the excess will be refunded as rebate of rentals. Alternatively, in some circumstances you can choose to extend the rental of the vehicle – this is commonly referred to as a ‘peppercorn’ rental.

Benefits

• You choose the vehicle you wish to drive and the lease period, normally between 12 and 48 months.
• Payments are lower as they are calculated on the VAT exclusive price of the car
• VAT registered businesses can reclaim a portion of the VAT paid on rentals, and all of the VAT paid on optional maintenance rentals
• The monthly payments can be offset against taxable profits, improving cash flow.
• The vehicle can be shown as an asset on the balance sheet.
• Where the sale of vehicle at the end of the agreement exceeds the ‘balloon’ amount, the difference is returned as a rebate.
• By adding an optional maintenance package you can combine all your running costs together in a single monthly payment

If you have any questions about any of our financial services please contact your local dealership where a business funding specialist will be happy to explore the best options for your circumstances.