PMD

What finance option is right for you?

We list the main features of the different finance solutions for you below
Hire Purchase (HP)
  • You pay an initial deposit which will normally include the VAT
  • The balance and interest is paid off over the agreed period of time
  • You own the asset at the end of the agreement (on payment of option fee)
  • You claim the capital allowances
  • You get tax relief on the interest
Lease - Fixed Term
  • Technically the Leasing company owns the goods
  • Rentals paid over the agreed fixed term
  • VAT is spread across each payment at no interest cost meaning up front deposit is much lower than HP
  • The leasing company normally claims the capital allowances
  • You normally get tax relief on the rentals (if leased over its estimated useful life)
Lease - Minimum Term
  • Technically the Leasing company owns the goods
  • Rentals paid for the minimum term but can be continued beyond
  • VAT is spread across each payment at no interest cost meaning up front deposit is much lower than HP
  • The leasing company normally claims the capital allowances
  • You normally get tax relief on the rentals
Operating Lease
  • Small deposit
  • A residual value is built in which reduces the monthly/quarterly rental costs
  • Asset is returned to the leasing company at the end of the agreed term
  • Off Balance Sheet – the obligation does not show in your liabilities
  • The leasing company normally claims the capital allowances
  • VAT is normally recoverable on each payment (special rules for cars)
Which Option?

In deciding which option to select, relevant factors may include:

  • How long you expect to use the equipment for
  • The income or corporation tax, VAT and accounting treatment of the product

For more details of these factors, see the Government’s Leasing and Asset Finance advice https://www.gov.uk/business-finance-explained/leasing-and-asset-finance

Suitability of Asset Finance

Asset finance may not be suitable in certain circumstances. You should be aware:

  • You will have to continue to pay for the equipment for the agreed period even if you no longer need the equipment or it cannot be used.
  • If you change the equipment during the agreed minimum rental period this could lead to higher charges.
    Asset finance is unlikely to be suitable if you are not sure if you will need the equipment for the minimum contract period.
  • Asset finance is unlikely to be suitable if you are not sure the equipment will be maintained and kept in a useable condition for the minimum contract period.

 

For more details of factors affecting suitability, see the Guidance published by the Institute of Credit Management, Managing cash when it’s time to investhttp://www.icm.org.uk/wp-content/uploads/2013/08/Resources_CFG_fla.pd

If you wish to register a complaint, please write to us at the address below or telephone us on 0161 633 2548

A summary of our internal complaints handling procedures for the reasonable and prompt handling of complaints is available on request and if you cannot settle your complaint with us, you may be entitled to refer it to the Financial Ombudsman Service at http://www.financial-ombudsman.org.uk or by contacting them on 0800 023 4 567.

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