HP vs BCH (Business Contract Hire)
Business contract hire is typically more common among people looking to finance a car through their business. Often these vehicles are used with efficiency in mind and are rarely kept at the end of the payment term. With BCH, you are paying off the amount the car is expected to lose in value during your contract period. This will be determined by contract length, car model and agreed mileage.
That being said, not all cars purchased through a business are used in the same way, so HP is still very much an option if you want to own the car at the end of the loan agreement. You will also find that unlike BCH, there are no mileage limits with HP. This means if you are covering a lot of business miles, Hire Purchase for business could be the way to go.
Can I claim back tax on business car finance?
One of the main attractions with business car finance is the ability to claim back ‘Up To’ 100% of the VAT on the payments. If your business is VAT registered and you are using your vehicle for business use only, you can reclaim 100% of the VAT. If you intend to use the vehicle for personal use as well, you would typically only be able to claim 50% of the VAT back.
Business expenses – How does that work?
You are able to claim back the monthly instalments on your new vehicle as a business expense, as well as road tax and fuel costs. The amount you claim however will be based on the CO2 emissions.
A car with emissions lower than 130g/km will allow you to claim the full amount, however if your new car produces a CO2 number over this amount, you can only claim 85%.