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PRODUCTS Service Providers	Benefits for the Customer	Contract Hire	Contract Purchase	Outright Purchase	Hire Purchase
Financial	Fully predictable cash flows in advance	1	1
	Does not increase company gearing
	Customer avoids negotiating maintenance
	Customer avoids risk on disposal
	Liability off balance sheet	6	Usually Not
Administration	Customer can choose to extend term			Not Applicable
	Customer avoids sourcing vehicle
	Customer avoids the sourcing of funding
	Customer avoids arranging maintenance	1	1
	Customer avoids arranging disposal
	Customer can own asset
VAT	VAT on vehicle purchase redeemable	2
	Customer reclaims VAT on finance element of rental	3	Not Applicable	Not Applicable	Not Applicable
	Customer reclaims VAT on services element of rental			Not Applicable	Not Applicable
Corporation Tax	Customer claims Capital Allowances (CA)		4	4	4
	Customer allowed depreciation instead of CA	5
	Interest cost allowable as tax deduction	5
	Service element of rental allowable as tax deduction			Not Applicable	Not Applicable

1. If on a full maintenance contract. Otherwise maintenance is arranged & paid for as the need arises.

2. This benefit passes directly to the customer through cheaper rentals.

3. 50% of VAT reclaimable if private use of the vehicle. If no private use then 100% of VAT reclaimable. Finance element includes depreciation, interest, Road Fund License, collection, overhead & profit.

4. Lower of £3000 and 25% of capital cost on a reducing balance basis.

5. Subject to £12,000 disallowance rule (half the excess rule).

Allowable rental =	12,000 + 0.5 (capital cost – 12,000)	X contract hire rental*
	Capital cost

6 In accordance with current accountancy practice. This is likely to change in the future.

*excludes service element