Finance options for buying a new van
With the year winding down and what looks like a slow rise, yet positively still on the upswing, recovery in the economy, perhaps you’ve been thinking of buying that much needed new van or adding extra vehicles to your fleets to increase business in the new year. But, as we are well aware and have been for a good few years now, that traditional methods, i.e. banks are still not lending as much as we need them to, or not lending at all in some cases. So what financial alternatives are out there to aid in getting businesses/SME's firmly back on the road so to speak?
I recently read an article saying that asset based lending is on the rise. This describes lending to a business or large corporations using assets not typically used in other loans. Instead, these loans are tied to things like inventory, accounts receivable, machinery and equipment. However, these types of loans often incur higher interest charges and can be more lucrative for the lending party than for borrower. Plus, they are typically provided via large financial institutions like banks, which means that it can still be difficult to get funds required by businesses to purchase new equipment such as a new van and this type of lending may not work for individuals.
If you have already chosen the right van to suit your own personal needs, what then is the best way of paying for it? Here are some finance options you may want to consider:
Hire Purchase can be a cost effective means of borrowing if ownership is required, as at the end of the contract period, the van is 100% yours. After paying an initial deposit, calculated as a percentage of the total cost, you can budget accordingly in advance with this option that offers fixed monthly repayments. There may be some tax relief on the interest charged as well and your new vehicle can be an asset on your balance sheet and benefits from writing down allowances Year 1 - 45% Year 2 - 25% Year 3 - 25% etc...etc...
Contract Purchase can aid in cashflow by way of reducing the amount of the monthly payments and flexible repayment periods. This option gives you all of the benefits of Hire Purchase (i.e. ownership of the vehicle) with all of the benefits of Contract Hire (i.e. no risk). You still own the vehicle and you are given a guaranteed future value so at the end of term you can either hand the vehicle back and owe nothing or pay a final lump sum (balloon payment) and keep it or sell it.
Finance Lease is essentially a vehicle usage agreement. This option is for those that do not require full ownership at the end of the agreement and is best for non-VAT registered business users looking for low initial deposit/outlay and maximum flexibility, as rentals are 100% allowable against taxable profits. Van rentals can be paid monthly, quarterly or annually throughout the lease period (usually 2 to 5 years) with the initial deposit normally expressed as monthly rentals in advance and a final lump sum (balloon payment) is usually included. At the end of the lease the van is sold or part-exchanged and the sale proceeds (less a nominal sum) are refunded to you as a rebate of rentals, excluding VAT.
There are more finance options available and I will add a second part in tomorrow’s blog post. Until then, if you are ready to buy or hire a new van, you can check out the outstanding deals on a wide variety of vans and competitive hire purchase and leasing quotations that Low Cost Vans provides to businesses and private individuals. Visit the website or give them a call. Because of their massive fleet buying power, customers reap significant savings and have direct access to an unparalleled range of cost effective funding and service solutions.
Continue with part 2 in the next blog post...
I recently read an article saying that asset based lending is on the rise. This describes lending to a business or large corporations using assets not typically used in other loans. Instead, these loans are tied to things like inventory, accounts receivable, machinery and equipment. However, these types of loans often incur higher interest charges and can be more lucrative for the lending party than for borrower. Plus, they are typically provided via large financial institutions like banks, which means that it can still be difficult to get funds required by businesses to purchase new equipment such as a new van and this type of lending may not work for individuals.
If you have already chosen the right van to suit your own personal needs, what then is the best way of paying for it? Here are some finance options you may want to consider:
Hire Purchase can be a cost effective means of borrowing if ownership is required, as at the end of the contract period, the van is 100% yours. After paying an initial deposit, calculated as a percentage of the total cost, you can budget accordingly in advance with this option that offers fixed monthly repayments. There may be some tax relief on the interest charged as well and your new vehicle can be an asset on your balance sheet and benefits from writing down allowances Year 1 - 45% Year 2 - 25% Year 3 - 25% etc...etc...
Contract Purchase can aid in cashflow by way of reducing the amount of the monthly payments and flexible repayment periods. This option gives you all of the benefits of Hire Purchase (i.e. ownership of the vehicle) with all of the benefits of Contract Hire (i.e. no risk). You still own the vehicle and you are given a guaranteed future value so at the end of term you can either hand the vehicle back and owe nothing or pay a final lump sum (balloon payment) and keep it or sell it.
Finance Lease is essentially a vehicle usage agreement. This option is for those that do not require full ownership at the end of the agreement and is best for non-VAT registered business users looking for low initial deposit/outlay and maximum flexibility, as rentals are 100% allowable against taxable profits. Van rentals can be paid monthly, quarterly or annually throughout the lease period (usually 2 to 5 years) with the initial deposit normally expressed as monthly rentals in advance and a final lump sum (balloon payment) is usually included. At the end of the lease the van is sold or part-exchanged and the sale proceeds (less a nominal sum) are refunded to you as a rebate of rentals, excluding VAT.
There are more finance options available and I will add a second part in tomorrow’s blog post. Until then, if you are ready to buy or hire a new van, you can check out the outstanding deals on a wide variety of vans and competitive hire purchase and leasing quotations that Low Cost Vans provides to businesses and private individuals. Visit the website or give them a call. Because of their massive fleet buying power, customers reap significant savings and have direct access to an unparalleled range of cost effective funding and service solutions.
Continue with part 2 in the next blog post...
Comments
Post a Comment