How does ownership of the asset work with financing?

The most common question we get asked is – do I own the asset at the end of the funding agreement?

The simple answer is – sometimes yes, other times no, this all depends on the type of product. 

Quick Answers

Hire Purchase – Yes 

Personal Contract Purchase (PCP) – Yes

Finance Lease – No

Contract Hire – No

Fixed Term Lease – No

Sale & HP Back – Yes

Let us help explain in a little more detail

Hire Purchase – this is the most common product available. When a business is purchasing an asset, the VAT element is needed to be paid upfront as a minimum as part of the deposit. With the VAT being covered upfront, the customer makes the same monthly payment over the agreed duration of the agreement. You are then given the option to purchase at the end of the term with an option to purchase fee. 

But importantly, at the end of this period – the business owns the asset.

Sale & HP Back (SHPB) – is a product used for businesses to support the finance of vehicles & equipment. The difference between this, and normal Hire Purchase is that you as the customer purchase the equipment through cashflow first. This may be because of the speed of which you need the equipment, you want to take the asset away after viewing/testing/inspecting etc. With this scenario, you sell the equipment to the lender (having paid your supplier already), who then provides you with a Hire Purchase to give you ownership back at the end of the agreement.

Personal Contract Purchase (PCP) – this product is specialist to the new & used car finance market, and is very popular for the reasons highlighted below.

The product is a form of Hire Purchase, but at the end of the agreement, there is a residual or balloon value to pay before taking ownership. 

As this product is only available for a private individual there isn’t a VAT element, so the deposit put down is the customer’s choice. At the end of the agreement, there is a residual value (balloon) which, once paid along with the option to purchase fee, allows you to take ownership of the car. The balloon is calculated based on your Anticipated Annual Mileage to ensure its accurate with the expected value of your vehicle. See our product page for more information.

Contract Hire/Fixed Term Lease/Finance Lease –

this is essentially you hiring the asset for an agreed duration, you do not have the option to own the asset.

Contract Hire is most common in the car or van sector for individuals or businesses. Whilst Fixed Term & Finance Lease agreements are specific products designed for businesses in different sectors.

At Focalise Finance, we pride ourselves on being helpful and personable – we would welcome the opportunity to discuss the various options with you, to ensure you’re making the right decision for your business.