With around 80% of businesses opting for this when setting up a scheme, Contract Hire is the most popular arrangement in the UK. It enables you to budget accurately and removes the hassle of finding, looking after, and disposing of vehicles.
Contract hire is simple to set up and manage. All you have to do is select your cars, choose your lease term and estimate your annual mileage (an important part of the process as penalties will be charged if you exceed your mileage quota.)
It also delivers a broad set of accounting and tax advantages as you can see here.
- You can deduct the full cost of finance rentals from taxable profits if the vehicle emits 130g/km of CO2 or less; or 85% of the rental on vehicles with higher emissions
- You can also recover 50% of VAT on the finance rental if there is private use of the vehicle, or 100% where the vehicle is business-only
- Should you decide to include maintenance in the contract, you can recover 100% of VAT on this element of the rental
With Contract Hire from Nationwide Vehicle Contracts, our comprehensive range of additional services includes servicing and maintenance, roadside assistance, fuel management, accident management and daily rental vehicles. View our latest contract hire and leasing special offers to find our more.
If you are looking to free up capital to invest elsewhere in your business, then Contract Purchase is likely to be the best option for you. Similar to Contract Hire, Contract Purchase gives you the benefits of reduced administration and fixed rental payments, as well as releasing capital for investment elsewhere.
With Contract Purchase, the vehicle appears on the balance sheet, allowing you to claim capital allowances, but the finance element of the rental payments is not subject to VAT, an obvious benefit if you are unable to recover VAT.
A Contract Purchase Agreement sees the business put down a deposit for a brand new car before paying fixed monthly instalments based on a monthly contract (often between 24 and 48 months), with the option of purchasing the car outright when the contract expires provided all terms have been met.
At the end of the contract, the business can pay a predetermined 'balloon' payment to complete the purchase of the vehicle or choose to return the vehicle back to us. The vehicle must be in good condition, otherwise further charges may apply.
NB: Nationwide Vehicle Contracts are specialists in Contract Hire and Finance Lease agreements. While Contract Purchase agreements are no longer available with Nationwide Vehicle Contracts, it is important that you review the benefits and exclusions of every lease contract to better understand which agreement is best suited to your needs.
If you are looking for greater transparency and flexibility, then the Finance Lease option may be best for you.
With Finance Lease, we purchase new cars for you and you lease them from us at a fixed monthly rate.
Finance leases may also be more flexible with their repayment plans, allowing you to pay for the car in fixed monthly instalments (on top of the initial payment).
Once you have made your vehicle selection, we calculate your monthly fee, taking into account the leasing term, mileage and the residual value of the vehicles. Unlike a contract purchase, the business will never assume ownership of the car.
The vehicle’s anticipated resale value is fixed at the beginning of the lease. However, at the end of the lease, if the resale value is lower than agreed, you pay the difference.
A Finance Lease allows you to show the vehicle on your balance sheet, with the outstanding rentals represented as a liability. This can be financially favourable if you expect the tax relief for depreciation to be greater than claiming capital allowances.
Considering a tax efficient, cost saving way to offer vehicles? Choose Salary Sacrifice. Last year, 5% of cars provided by FN50 leasing companies were funded through these schemes, and this is expected to grow.
The employee funds the car, by taking a reduction in salary, and pays company car tax. Because the cost of the non-cash type benefit is deducted from the employee’s gross salary before statutory deductions, he or she is able to save income tax and National Insurance contributions.
Salary Sacrifice for cars is ideally suited to organisations who want to attract and retain qualified and experienced employees. For the employee, Salary Sacrifice gives them the chance to own a brand new car at a cost they can afford, with the benefit of hassle-free motoring as the maintenance, servicing, breakdown cover and insurance are normally included in the price.
- With company car tax (CCT) rates as low as 5% on very low CO2 cars, employees pay considerably less tax if they take a car as a benefit rather than taking its equivalent in salary taxed at 20% or 40%
- Lower CCT also means a lower Class 1A National Insurance bill for the employer
- The monthly cost of a Salary Sacrifice car will always be lower than one bought privately, thanks to its tax efficiency coupled with our purchasing power. Employees can also include breakdown cover, inclusive maintenance and corporate accident management cover in a single payment directly from their salary
- While there’s the potential for organisations of all sizes to benefit from salary sacrifice, smaller fleets in particular need to carefully consider whether the schemes are appropriate, especially if they have high staff turnover. This would mean that cars would be returned early with potential early-termination fees. For businesses where a low proportion of employees are paid above the minimum wage, the schemes are unlikely to be cost-effective as there won’t be sufficient salary to sacrifice
For the employer, Salary Sacrifice means the ability to introduce an additional benefit, either to all employees or to selected groups, without increasing overall wage costs. It also strongly encourages users to choose low CO2 vehicles, enhancing the organisation's green credentials.
NB: Nationwide Vehicle Contracts are specialists in Contract Hire and Finance Lease agreements. While Salary Sacrifice agreements are not available with Nationwide Vehicle Contracts, it is important that you review the benefits and exclusions of every lease contract to better understand which agreement is best suited to your needs.
With Outright Purchase, the main benefit is that right from the start, the car is the property of the company, with the company having complete control over its use, and taking complete responsibility for the servicing and maintenance.
This means that for the company there will be a regular draw on finances, as well as higher tax implications as tax deductible capital allowances are permissible only up to a total of 25% of the value of the vehicle, or £3,000, depending on which is higher.
NB: Nationwide Vehicle Contracts are specialists in Contract Hire and Finance Lease agreements. While Outright Purchase agreements are not available with Nationwide Vehicle Contracts, it is important that you review the benefits and exclusions of every lease contract to better understand which agreement is best suited to your needs.