Whether leasing a motorbike, car, van or truck the process can be a minefield even to the initiated.

We will take you through the various forms of lease & purchase, their pros and cons, the pitfalls of “Fair Wear & Tear” guidelines and how best to avoid trouble and needless expense.


Benefits of leasing

  • Avoid depreciation pit-falls of purchasing a brand new vehicle.
  • Affordable and fixed monthly costs.
  • Maintenance packages can be included in the monthly costs.
  • Fixed mileage contracts.
  • The cost of motoring is more predictable.
  • No fear of the warranty expiring.
  • Drastically reduced deposit costs.
  • Wide choice of leasing and financing methods allowing you to tailor design your motoring to suit you.

How does a company calculate the lease price

Essentially, they calculate the difference between the original purchase price and the residual value of the vehicle in question. “Residual Value” refers to the worth of the vehicle at the end of the contract. The maximum length of a leasing contract is usually 4 years and the minimum 1 year. Very roughly speaking, a new vehicle can lose 30% of its value in the first year and, on average, and again very roughly speaking, 10-20% every year thereafter. It depends very much on the make and model of the vehicle etc. Some vehicles hold their value much better than others, so researching the market is time well spent.

Finance companies are able to calculate the residual value because the duration of the lease and the mileage permissible per year is fixed into the contract and the vehicle is expected to be returned in a condition in line with the “Fair Wear & Tear” terms and conditions of the given company. The older the vehicle, of course, the more forgiving the terms and conditions become.

Although it should be noted that wear & tear rules tend to be strict as it is another way for leasing companies to increase their earnings.

Company vehicle finance options in brief

Purchasing vehicles outright for your company will improve image and please the employees. The vehicle will also be viewed as an asset that can be sold and the profit kept. The company will be responsible for repairs, MOT and servicing.  However, it might not necessarily be the most cost effective way when taking into account depreciation, running/servicing costs and road fund licence charges. It will usually be more expensive than using an appropriate method of finance whatever the size of the fleet. Also, purchasing requires a large initial payment and if an employee leaves or you decide to downsize, the company is lumbered with the vehicle.

The trick here is to seek the best financing option through your own research and from sound advice from people you know and trust, such as Charmrace. We can help with all aspects of leasing, including finding the best leasing company that can fulfill your requirements, relieving the stress from your company with all those annoying automotive problems.

Business Contract Hire

Business Contract Hire is the most straight forward and popular method of finance that companies choose, as it requires a minimal and negotiable deposit, followed by the monthly payments with no balloon payment at the end of the contract.

The more vehicles that are leased at one time from the same leasing company the more discount is warranted, the lower the initial and monthly payments can be, and can also help in negotiating the maintenance contract and the annual mileage into the bargain. Moreover, luxury vehicles become more accessible etc. However, whether it’s just one or more vehicles required there are always deals available and the VAT advantages remain the same.

Daily Rental

A short-term fix for companies that need vehicles temporarily and at short notice for visiting employees or clients, for example, or as fill-ins whilst waiting for new or repaired vehicles to be delivered back to you. It is not the most cost effective solution for long periods, but the VAT is returnable.

Short term contract

This is a rarer form of leasing that not all leasing companies like to get involved with. However it is good for companies requiring a vehicle for 1-12 months, maybe to test a make and model before agreeing to a fleet of them. Or for probationary and visiting employees.

Finance Lease

For companies that want to take control of the administration of their vehicles, and have the asset show on the balance sheet. A company can choose to pay the entire cost over the agreed lease period, plus an interest charge, paying reduced monthly payments over the period with a final “balloon” payment based on the anticipated “Residual Value” of the vehicle at the end of the term.

Sale and Lease Back

If your company already owns a vehicle, or a fleet of vehicles, the option exists to sell them to a leasing company and then your company leases the same vehicles back from the chosen leasing company.

In effect, your company receives an injection of cash, simultaneously relieving it from the fuss and expense of depreciation etc. Also, precise terms and details can be negotiated and tailored according to the merits of each circumstance.


This provides the disabled with the option of leasing a brand new vehicle, a powered wheelchair or a mobility scooter instead of collecting disability allowance.

Most main dealers are “Motability” registered as well as some of the larger leasing companies. All the benefits of regular leasing remain the same; fixed motoring costs, including maintenance and vehicle recovery options.

If you are disabled and don’t drive, yet would still like a vehicle, you do have the option of including two

named drivers on the vehicle. Unfortunately, Motability do not help with the insurance costs.

If you are considering a Motablity plan for yourself or a family member aged 3 or over, please visit




This system is aimed at VAT registered businesses, companies, partnerships, sole traders, individual businessmen etc.

The finance company actually owns the vehicle from the beginning of the contract and keeps it at the end.



  • 50% VAT can be claimed on cars, and 100% on commercial vehicles.
  • With the option of a “Balloon” payment at the end of the contract, monthly payments can be reduced even further.
  • Generally low monthly costs that can include maintenance.


  • Interest rates can vary.
  • The business can never own the vehicle.
  • The car will be sold on to a third party.
  • Risks involved with operation of the vehicle, as with any contract.

The finance company will calculate the monthly payment on the basis of four factors:

  1. The showroom price of the vehicle.
  2. The length of the contract.
  3. The agreed annual mileage.
  4. The projected “Residual Value” of the vehicle.

The balloon payment at the end does not always equal the residual value of the vehicle as it can vary according to the amount of the initial payment, the make and model of the car and what the particular finance company will allow.

Once the contract has ended and the vehicle has been sold on to a third party, if the sale price is more

than the agreed balloon payment, then the finance company will refund some of the proceeds back to the company that took out the finance in the first place. Some leasing companies may also allow you to take out a secondary rental contract if you want to keep the car for another term.



Very similar to “Finance Lease”, but without the balloon payment at the end.



  • You are paying only for the use of the vehicle.
  • When the contract ends, you just hand the vehicle back.
  • Offers a further control over your cash flow.
  • 50% VAT can be claimed back on the finance.
  • 100% VAT can be claimed back on the maintenance.
  • Lower initial payments/flexibility in payment profile.
  • No concerns regarding depreciation/residual value etc.
  • Leasing companies offer full maintenance packages.
  • Prices on fleet purchases are more negotiable.


  • Vehicle insurance must be fully comprehensive.
  • The vehicle must be returned in good order as described in the guide to “Fair Wear & Tear” supplied by the leasing company.
  • There is no option to purchase the vehicle.
  • The vehicle can never be owned by the client.
  • An early end to the contract can prove quite costly.

This method of leasing tends to be the most popular for its simplicity. Also, it accommodates for adjustments along the term of the contract. For example, you can lengthen the duration of the agreement before it expires. Or you can increase the mileage per year if you see that you are driving more than you originally thought you would. Most leasing companies have a choice of annual mileage from between 8,000 to 40,000 miles a year, but will specify an excess charge for every mile driven over the agreed mileage. This could be anything from a few pence per mile to a few pounds. It depends on the make and model of the vehicle and how much the extra mileage will affect the residual value of it.



A somewhat ignored method of injecting cash back into a business, however it seems to be gaining in popularity these days. It is only available to businesses that already have a fleet of company vehicles

whether it be a fleet of motorcycles, vans, trucks, cars or a mixture of the four, they can be sold to a leasing company and leased back from it, gaining cash and all the benefits of contract hire.

As with the other methods of finance, the monthly payment will be calculated according to the present value of the vehicles and the anticipated residual value at the end of the agreement.



  • No more worries concerning the depreciation of the fleet.
  • Fixed monthly costs that can include maintenance.
  • Possible tax benefits.
  • An injection of cash into your business can improve over-all cash flow.
  • Low initial payments.


  • The yearly mileage will be fixed.
  • The vehicle must be well maintained during contract and on return, must comply with the leasing company’s guide to “Fair Wear & Tear”.
  • The vehicles can never be owned by the business.

The process…

  1. On each vehicle you will need to know its exact age, current mileage, an overview of its general condition, and the full service history.
  2. Investigate the value of each vehicle using “Glasses Guide”, which is what most finance companies and second hand car dealers refer to. Also, use the internet to glean the best average price.
  3. Now you are equipped to contact a reputable leasing company.
  4. The leasing company will inspect the vehicles and make an offer after having done their own research.
  5. If you do not agree with their offer, you are not obligated to accept. Either try another leasing company, or change strategy.
  6. If you accept, the leasing company will pay you the agreed sum, after which you will be left with one simple monthly payment.





  • Useful for new employees on a probationary period.
  • Good for temporary staff in need of transport.
  • A vehicle can be organized at very short notice.
  • Quick transportation solution to and from the airport, train station etc.
  • Good as a stop gap solution if a vehicle is in for a service, or if you are waiting to take delivery of a new vehicle.


  • Can be expensive if renting on a regular basis.
  • Will be expensive if the rental vehicle is damaged.
  • You have to spend time checking the vehicle before driving away, as you do not want to be blamed for damage that you are not responsible for.
  • The vehicle must be returned in the same condition it was received. Including the amount of petrol in the tank. If the vehicle is not clean, you may be charged for a valet.
  • Many rental companies only allow rental to drivers 21 years of age or over.
  • You will need a “singular-use” code from the DVLA which the rental company requires in order to check the validity of a driving licence, convictions etc. For further information go to: https://www.gov.uk/driving-abroad

Before you sign a rental contract, you must read it carefully. Some companies impose a daily mileage allowance, i.e. an amount of miles permitted per day.

On returning the rented vehicle, the rental company will thoroughly inspect it for any damage not covered by normal wear and tear standards.

Rental is ideal for a quick solution to transportation problems. But be aware that it can work out to be rather costly if you damage the vehicle or if you need it for a longer period than was otherwise calculated at the beginning. Short term contract hire can be a more cost effective solution.



In essence, it is very similar to personal and business contract hire except that the duration of the contract can be between one and twelve months only. It will certainly be more cost effective than renting for such periods.

As with other methods of leasing, it will be a fixed mileage contract that is agreed at the pricing stage of the quotation. Flexibility with short term leasing can vary from leasing company to company, but usually contracts last three, six and twelve months.



  • Low initial payment.
  • Fixed motoring costs.
  • A brand new car contracted for a year, or less, will need little maintenance.
  • VAT deductions for businesses.
  • You are only paying for the use of the vehicle.
  • No worries concerning vehicle depreciation.
  • Simply hand the vehicle back at the end of the agreed term.
  • Useful for staff that need transport for a short period of time.
  • Lease a vehicle short term if you are waiting delivery on another.


  • Difficult to increase the length of the contract beyond the agreed period.
  • As the contracts are shorter, monthly payments can be a bit more than longer contract deals. Consequently, the initial payment will also be higher.
  • If you damage the car, all the advantages of a short term lease can be lost.



Effectively, this is where the buyer takes a loan either through their bank, a finance company or through the dealership from where the vehicle will be purchased.

Finance companies tend to offer a higher rate of APR as compared to banks, but dealerships are proving to be the most flexible and competitive, particularly the more established companies such as VW, BMW and Mercedes that have “in house” finance departments.



  • Finance over a longer period to keep the monthly payments low.
  • Lower deposit, more room for negotiation.
  • APR is fixed throughout the duration of the agreement.
  • Once the contract ends the vehicle is totally yours to sell or keep.
  • You can settle the finance agreement before its end, usually with no penalty.
  • If the vehicle is purchased through hire purchase for use by a VAT registered company, the VAT could be claimed back.
  • Once the agreement has ended and the vehicle is owned, it can be shown as a company asset.
  • There are no worries with regards to a leasing company’s “Fair Wear & Tear” conditions and the horrendous cost that this can incur.


  • At the end of the agreement the vehicle is yours, but so will be its depreciated value.
  • You will only be the registered keeper, not the owner. Once the agreement is completed, then you will be the legal owner.
  • Late payments will definitely and promptly affect your credit rating.


Hire Purchase – the process

Once the appropriate vehicle has been found, a finance application is completed at the dealership and then sent off to a finance company at which point you will be credit checked.

If successful, the finance company will pay the dealership and you will pay the finance company on the agreed monthly basis. You will then be the registered keeper of the vehicle and the finance company will be the legal owner.

On the day the final payment is made you will be the legal owner of the vehicle.



This method of finance is the most popular for non-business use. It is similar to business contract hire in that they are both based on a fixed duration and annual mileage agreed at the time of quotation.

Rules regarding mileage amendments mid contract can vary depending on the leasing company. The monthly payment will alter relative to the changes accordingly, and may incur administrative charges.

If the agreed mileage is exceeded, there will be a charge per mile that varies depending on the vehicle and its residual value. So it’s best to give a good deal of thought to what your annual mileage will be before signing a contract.

Fixing motoring costs is the aim of most people looking to lease a car and adding maintenance to your monthly payment is a good way of achieving this. It generally includes servicing, batteries, tyres, exhausts and routine check-ups, i.e. water, oil, brake fluid, air-conditioning etc.

At the end of the contract simply return the vehicle in accordance with the leasing company’s “Fair Wear & Tear” guidelines.

This part of the contract is probably the most nerve racking. If there are dents, scratches and scuffed alloy wheels and bumpers beyond the acceptable ”Wear & Tear” guidelines, it could cost a tidy fortune. For example, a scuffed alloy wheel on a Ford Fiesta can cost anything from £55…and it’s rarely just the one! A scratch on a wing could cost anything from £350…the whole wing will have to be sprayed. The leasing company will always add its own charges to any work that needs to be carried out.



  • Leasing packages are flexible in terms of deposits, monthly payments and maintenance and can be tailored to suit your finances.
  • No worries with regards to depreciation and selling it on.
  • Contracts can be amended along the way.
  • You can have any vehicle that your monthly economics will allow.
  • Contracts can be negotiated over two, three or four years.
  • Predictable motoring costs.
  • You can have a new vehicle every few years.


  • You must have fully comprehensive insurance.
  • Ending a contract early, for whatever reason, can be quite costly.
  • On returning the vehicle, falling foul of the leasing company’s “Fair Wear & Tear” guidelines can be very costly.
  • You can never own the car.



This method is useful to non-VAT registered customers and businesses that want to own the vehicle at the end of the contract.

One of the many good aspects to this product is its flexibility. You have the option, for example, to make a large initial payment at the start with a large “Balloon” payment at the end, keeping the monthly payments to a minimum. It can be tailored in a way to suit your finances…

As with all the leasing methods, the monthly payment is calculated through the difference between the retail value of the vehicle and its residual value or depreciated value that it will have by the end of the contract. So, choosing a vehicle that holds its value is better for you in the long run, in that the less the vehicle loses the better the deal offered. For this reason, Lease Purchase tends to be more popular for those that are interested in the more expensive, luxury end of the market.



  • The length of the contract can be between 2 and 4 years, but it can be paid off at any time.
  • VAT is not included in the monthly payment.
  • You will own the vehicle at the end of the contract.
  • The vehicle can be counted as a company asset and its value can be recorded against taxable profits.
  • Whether the vehicle is for a private individual or a business, it can release cash for other projects.
  • The agreement can be settled at any time.


  • If the chosen vehicle has not been properly researched, there exists a danger that the end of contract balloon payment could be greater than the residual value of the vehicle.
  • There is no choice…at the end of the contract you have to take ownership of the car, so you must be absolutely sure at the beginning.
  • This method works better for luxury, or higher end vehicles as they tend to hold their value better.



This method is for private customers wanting a new vehicle in a cost effective, manageable and flexible way. Leasing companies use different names to describe this method such as Choices, Options and Drive Wise…

It is similar to Lease Purchase and Finance Lease, in that there is a balloon payment at the end of the contract, however there are options that are unavailable with the other methods:

  • At the end of the contract, if the vehicle is worth more than the balloon payment, you can sell it privately to pay off the balloon and keep any profits that may be left.
  • Simply return the vehicle to the company and walk away without having the need to pay the balloon.
  • The vehicle can be kept either by paying the balloon, or by re-financing the balloon, which most leasing companies will allow you the opportunity to do.
  • You can trade-in the vehicle at a dealership for another vehicle of your choice and if its trade-in value is larger than the balloon payment remaining on the contract, you could use the difference towards the deposit on another vehicle if you were so inclined.
  • Pay off the balloon and the vehicle is yours with no more monthly payments.



  • The balloon can be re-financed.
  • Servicing and maintenance can be included into the contract.
  • Low initial payments.
  • Due to the low deposit requirements, luxury vehicles are more accessible.
  • The option to walk away gets rid of depreciation concerns.
  • The re-sale value of the vehicle is decided and fixed at the time of signing the contract.
  • Can be a very cost effective way of financing.
  • Monthly payments are not subject to VAT.


  • If the vehicle depreciates excessively, the best option might be to return the vehicle at the end of the contract.
  • Financial circumstances could change by the time the contract ends and you may have trouble paying, or even worse, re-financing the balloon.
  • VAT is payable on service costs.

With PCP, keeping the monthly payments low can be quite easy. As with the other methods, being as accurate as possible in estimating your annual mileage can make a difference. There’s no point in signing up for 12,000 miles a year when you will only do 8,000, for example. The Guaranteed Future Value, (GFV), residual value and the balloon are calculated using the fixed annual mileage as a factor. The more the estimated mileage, the less the vehicle’s estimated future value will be at the end of the contract.

Also, with PCP, most companies can increase the length of the contract to four and five years reducing the monthly payments and, subsequently, the balloon will be less too. And if you leave a larger deposit than the minimum required, this will also reduce the monthlies.



This is an area of leasing growing in popularity, particularly through main dealerships as they can give their own warranties and service packages, along with finance.
Any car can be leased in so far as a finance company accepts it as a viable risk and, the less mileage and the newer it is, the more likely it will be accepted.

Most used cars that are leased have either previously been leased and were returned before the end of their contracts, or have completed the full term and are still in enough of an acceptable condition to sell or to re-lease. In some cases there could still be some time left on the manufacturers warranty.


…The Process

The broker, or customer, locates the desired vehicle and a price is negotiated based on the condition, age and mileage, as is usual. The finance company will then give the vehicle a thorough check inside and out and decide whether or not it is worth the risk.

Once the vehicle has been checked and the finance company agrees to take it on, all that will be left to do will be to decide the annual mileage to be stated on the contract, the duration of the contract and the method of finance. When all this has been decided and the contract signed, the vehicle will be delivered to you within a couple of days, usually.


  • A less costly alternative than leasing a new vehicle.
  • Lower minimum initial deposit required.
  • Dealerships will often include a service plan.
  • Once a finance company has accepted a vehicle, it becomes easier to purchase a warranty plan.
  • Delivery time is much faster than it would be than with a new vehicle.


  • To find a good deal, extensive research is required, i.e. to find a vehicle in good condition, low mileage etc.
  • The chosen vehicle will have to be thoroughly inspected by a professional before a finance company will consider taking the risk, and this can take time.
  • The residual value of a used vehicle at the end of a second financing contract will be seriously reduced and could deter finance companies from taking on the risk. However, this eventuality very much depends upon the make, model, mileage and general condition of the vehicle.

Even an extensive professional inspection of a vehicle can miss deeper problems that a vehicle may have, so there is always a risk of inheriting an expense that had nothing to do with you. So there aren’t too many finance companies interested in used car leasing.

Including Maintenance In Your Leasing Contract

The cost of including maintenance into a leasing contract will vary depending on the make and model of the vehicle. Also, the duration of the contract can affect the cost too, but not by much. The average extra cost of including it in your contract is around the £25 mark, per month.

Generally, it is a very good idea to include a maintenance package into your leasing contract as you can never know what lies around the corner, or indeed, under the bonnet.

Even though brand new vehicles come with their own manufactures warranties etc. they will still need servicing, i.e. oil, water/anti-freeze, brake fluid, brake pads etc. etc. Every leasing contract over a year will need servicing and the leasing company will expect to see the service history when you return the vehicle, as will be stated in your contract


    • Your servicing costs are fixed, and the unexpected eventuality covered.
    • The leasing company will make all the servicing arrangements.
    • A leasing company will be connected to hundreds of servicing garages all over Great Britain that will collect your vehicle, service it and drop it off again with no extra charges.

The leasing company will keep a record of the servicing, so you will not have to run around collecting paper-work at the end of the contract.

Usually, you will be given one telephone number to call for any problems that might occur to your vehicle.

Tyre Replacement Cover

An optional extra that can save you time and money. You never know when a puncture will strike…
The extent of this cover will vary from company to company. Some include road side puncture repair and some do not. Some companies don’t cover punctures at all. It is something to ask when the time comes.

Most companies that offer this cover will replace a tyre when it has worn to a depth of 2mm rather than the British Standard of 1.6mm, and offer a mobile tyre fitting service with the cover.


  • Relieved of the burden of hunting the market for good tyres at a good price. Most leasing companies will only use premium brands and will know exactly which tyre for which vehicle.
  • For fleet business, most companies can arrange scheduled regular inspections of tyres, as large replacement orders are more cost effective.
  • Tyre cover usually includes a free mobile fitting service that can be booked by appointment at your home or office, or where ever it is most convenient for you.

Extra Options Available

  • Glass cover will take care of cracks in the windscreen to smashed side windows. The extent of the cover will vary from company to company. Some companies offer a free mobile window replacement service as with the tyres.
  • Breakdown cover – a necessary and worth while expense for peace of mind. Even brand new cars can break down and leasing companies can offer quite competitive rates. Cover can include Roadside Assistance whereby if your vehicle cannot be repaired on the spot, it will be taken to either the nearest garage or to a garage of your choice, it depends on the type of cover, which can vary between leasing companies.
  • Home Start includes all the benefits of Road Side Assistance but with recovery from your own home.
  • Relief Vehicles are sometimes included with break down cover. If not, it could be an optional extra that can be very useful.





  • Advise you as to which vehicle will be worth your money and will suit your purposes.
  • Source the vehicle from our extensive list of suppliers.
  • Advise you as to which method of finance is best for you.
  • Negotiate the pricing for the best quotation possible.
  • Deal with all the required paper work.

If necessary, we can arrange finance through either Close Brothers or Shawbrook Bank.



  • Give it a BOSCH 50 point check that will qualify the vehicle for BOSCH ROAD SIDE ASSISTANCE for a year, worth £100.
  • Check all electronic systems above and beyond the 50 point check.
  • Check the body and coachwork for any imperfections that might not be apparent to the untrained eye, but very apparent to the leasing company’s inspectors at the end of the contract. You don’t want to be penalised for something you are not responsible for.
  • Make sure the vehicle is clean and presentable for delivery to you.



  • Show you how it all works before we leave you in peace.
  • Replace any light bulbs that might blow, over the period of the contract, free of charge. Simply drive to Charmrace, and we will do it while you wait.
  • Repair punctures that might occur free of charge. Just phone Charmrace and we will arrange it.
  • Replace irreparable tyres with guaranteed price match, whatever the make.
  • Diagnose any problems that the vehicle might develop, and arrange for repairs under the warranty, where applicable.
  • Help with, and negotiate on your behalf, any insurance claims that might occur.
  • Help and advise you with the “Fair Wear & Tear” terms and conditions at the end of the contract. We will inspect the vehicle in search of scratches, wheel scuffs etc. that the leasing company might find unacceptable, and advise you accordingly.
  • Offer you the best prices in the UK for any body-work, coachwork and wheel refurbishments that might be necessary before handing the vehicle back to the leasing company for inspection at the end of the contract…Charmrace can save you many pounds in this respect.
  • Collect your vehicle from your home or work, and prepare it for collection by the leasing company from Charmrace, giving you peace of mind and a stress free ending to your contract.


Maintenance, Tyres & Glass

Charmrace can work out a maintenance plan for your particular choice of vehicle that can cover all the servicing, replacement of tyres and chipped and broken glass at very competitive rates. We can also include a courtesy vehicle while yours is being repaired.

As with all leasing companies, we will price your maintenance package according to the make and model of the vehicle and the length of your contract.

The advantage here is that you will have an experienced and mature team of mechanics that are Bosch Approved and have decades of experience between them, taking care of all your automotive needs.