In the UK, the majority of business vehicles are sourced through some type of funding. Businesses a lucky enough to have the choice between Contract Hire, Finance Lease, or Hire Purchase agreements.


Hawkstone Commercials is a regulated funding broker with strong working relationships with a wide range of finance providers across the country. We help our customers understand the differences between funding options and which one is most suitable for their business.


Our asset finance solutions are purpose built so that you can invest in new assets that drive your business forward, whilst protecting your cash flow.

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This type of funding has become very popular in recent years. It allows a lessee or user to hire a vehicle for a set period of time. The mileage is agreed at the point of order and the customer pays a fixed monthly rental for the term. There is no option for the customer to own or purchase the vehicle at the end of the contract, it must be returned to the leasing company.


The road tax and vehicle registration fees are all included in the monthly rental payments. The monthly rental takes in to account the cost of the vehicle, registration fees, road tax, the duration of the contract, the expected mileage, and the predicted residual value. The choice of vehicle specification can have an impact on the customer payments. Two vans may have the same list price, but if one has a higher predicted residual value this will be reflected in a lower monthly rental rate.


At the point of order, the customer will be asked if they would like to take out the service and maintenance package which is an additional fee each month. This can cover the annual service at a franchised main dealer and tyres.


Fixed-cost motoring

Frees up capital

Steady cash flow

100% of VAT reclaimable where vehicle is only used for business

50% of VAT reclaimable if it is also used for personal use

Rentals are considered a tax-deductible expense item

Reduces the stress of vehicle ownership

No need to find a buyer at the end of the term

No option to purchase or own the vehicle

Need to estimate and agree the mileage you are going to use at the start of the contract

Charges may occur if you damage the vehicle


Much like a contract hire agreement, a finance lease contract allows the lessee to hire a vehicle for a fixed monthly fee, but it also transfers the majority of the risks and rewards of ownership of the vehicle to the lessee.


Funding a vehicle through a finance lease means that the vehicle will appear on the lessee’s balance sheet, with outstanding rentals represented as a liability. A finance lease is usually worked out using the estimated residual value of the vehicle which will be reflected in both the monthly payments and the final balloon.


The usual payment structure is an initial payment, followed by fixed monthly payments over an agreed term, with a balloon payment at the end that represents a percentage of the value of the vehicle.


At the end of the term, if you do not want to keep the vehicle, or if you don’t have the funds to settle the balloon, you can sell the vehicle and use the proceeds to settle the finance directly with the finance company.


Fixed monthly payments

50% of VAT can be claimed on the finance

Rentals are tax deductible

Potential to carry on using the vehicle at the end of the term

Vehicle will be listed as an asset on the balance sheet

The lessee will not be the overall owner of the vehicle

The lessee will have responsibility for the servicing of the vehicle


For business owners who like the idea of vehicle ownership, hire purchase, which can be referred to as lease purchase, is a fantastic way to do so. More commonly presented as a ‘HP’ agreement, a hire purchase very different to a contract hire or finance lease. This agreement allows the customer to hire the vehicle from a supplier with an option to purchase it at the end of the hire term.


The agreement may require a large deposit than the other options we have mentioned, but it all gets put against the overall cost of the vehicle, meaning you’re not throwing money away. A typical HP agreement would typically involve a deposit, then the remaining balance paid over a set period of time.


Customers can choose whether or not they want a balloon at the end to bring down the monthly payments. If you want to avoid mileage restrictions and penalties, this may be the agreement for you.


Customer can own the vehicle at the end

Purchase cost may be tax deductible through capital allowances

Interest elements on monthly payments may be tax deductible

Outstanding instalments appear as a liability on balance sheet

VAT can only be reclaimed if vehicle is used exclusively for business purposes

Vehicle appears on balance sheet

Business handshake

Ready to discuss your options?

Call our helpful team to discuss your requirements on:

01656 47 00 55