Finance options for buying a new van - continued
Vehicle finance alternatives are out there to aid in getting businesses, SME’s, or private individuals on the road when they need to buy a much needed new van or require extra fleet vehicles to start up or increase business. Unfortunately we are well aware 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. We have explored a few finance options in last week’s blog post. Today, we continue exploring some possible finance methods that may suit your needs and help to get you behind the wheel of your very own brand new van.
But first, here are some things to consider before choosing the right finance package:
Term – For what length of time would your business need to lease the vehicle for? The general rule is that the longer you lease a vehicle for, the cheaper the monthly rental will be.
Mileage – How many miles will you drive the vehicle per year? The monthly cost for the van lease may be heavily dependent upon the annual mileage, as this is inextricably linked to the depreciation of the vehicle; the more miles covered each year, the higher the monthly cost will be.
Deposit – Leasing will require some form of initial payment. The deposit can be the equivalent of a few months rental, up to 50% of vehicle cost, or an increased amount of your choosing. If your initial payment (or deposit) is higher, then your monthly rentals will be lower.
Maintenance –Will you require a maintenance package that will include the cost of servicing and tyres on the vehicle? This does add more costs to a business contract hire package; however, keep in mind that a vehicle needs to be maintained regardless. In a high mileage leasing situation, having a maintenance package that includes support from the chosen finance can provide an added time saving benefit.
Contract Hire is essentially an operating lease with a full maintenance package. This type of finance method generally allows for regular fixed monthly rentals to help with budgeting, cash flow and forecasting, and it leaves capital free for other essential business purposes. It provides you with the all-important use of a commercial vehicle, but without the responsibilities of ownership. At the end of the contract, simply hand the vehicle back. It can be an Ideal option for VAT registered larger fleet operators, as they do not have to allow for or anticipate depreciation costs and helps with forecasting tax liability. These rentals are usually 100% allowable against taxable profits.
Lease Purchase is a lease with the option to purchase contract. It is similar to a finance lease agreement. You essentially rent the vehicle for a stipulated contract period with an option to buy it at the end and with part of the rental charges credited toward the purchase price. This facility can have a balloon profile, which defers a large payment to the end of the contract, thus reducing monthly rental and aiding cashflow.
Full Pay-out Finance Lease can be a very tax efficient method of financing your van. A relatively small initial rental or deposit, (normally 3 monthly rentals or repayments in advance) followed by the remainder of the rentals or repayments over a set term. This can sometimes come with a choice of up to a 5 year term. If you are not VAT registered, it means that you pay the VAT monthly and similarly, VAT registered companies pay the VAT monthly, and claim it back quarterly. 100% of the monthly repayments are offset against taxable profits for the full term of the agreement. At the end of the term, you are legally obliged to sell the vehicle, as the taxman will not allow you the tax advantages of the lease as well as ownership of the vehicle at the end of the agreement. You choose who you sell the vehicle to, you negotiate the price, and then you pay the finance company up to 5% of the sale proceeds. You keep about 97%. Normally you would use the 97% of the sale proceeds that you have retained as the deposit on your next new van, but you are not obliged to do so and you can do whatever you want with it as it is your money. With this option, if you choose to part exchange your old van for a new van, which you can do at any time in the agreement, the supplier of the new van will request the settlement figure from your current finance company, and should the settlement figure be less than the market value of the part exchange, the difference can then be used as part or all of the deposit on the new van, whilst if the settlement is more than the market value of the part exchange, the difference can be added to the new finance agreement, but the deposit will then need to be paid in full. The new finance figures are calculated dependent upon the settlement figure and the new supplier would then pay the finance company the up to 5% of the sale proceeds of the part exchange vehicle to close the previous agreement. Should you decide you want to keep your old vehicle after the term of the agreement has finished, without selling it, you can request what is called a Secondary/Peppercorn Rental figure from your finance company, which you then pay annually instead of monthly, and it allows you to keep the vehicle for up to a further 2 years. This figure would normally be in line with whatever the monthly figure was during your finance agreement, but would only be paid once a year instead of once a month.
As you have read, there are some alternative finance options available. It is important to research which option will best suit your needs, so be sure that you understand the terms and conditions and discuss your personal/professional requirements with whomever you undertake a finance deal with.
At Low Cost Vans, our customers reap significant savings and have direct access to an unparalleled range of cost effective funding and service solutions. For business leasing, whether it's one vehicle or hundreds, we will assess each fleet on its requirements, using our specialist industry knowledge and experience to deliver a competitive solution. While those needing personal leasing, will benefit from discounts previously achieved only by large fleet buyers. Low Cost Vans are committed to offering a premium quality service for the duration of your agreement, not just when purchasing, so give us a call.
But first, here are some things to consider before choosing the right finance package:
Term – For what length of time would your business need to lease the vehicle for? The general rule is that the longer you lease a vehicle for, the cheaper the monthly rental will be.
Mileage – How many miles will you drive the vehicle per year? The monthly cost for the van lease may be heavily dependent upon the annual mileage, as this is inextricably linked to the depreciation of the vehicle; the more miles covered each year, the higher the monthly cost will be.
Deposit – Leasing will require some form of initial payment. The deposit can be the equivalent of a few months rental, up to 50% of vehicle cost, or an increased amount of your choosing. If your initial payment (or deposit) is higher, then your monthly rentals will be lower.
Maintenance –Will you require a maintenance package that will include the cost of servicing and tyres on the vehicle? This does add more costs to a business contract hire package; however, keep in mind that a vehicle needs to be maintained regardless. In a high mileage leasing situation, having a maintenance package that includes support from the chosen finance can provide an added time saving benefit.
Finance options for buying a new van part 2
Contract Hire is essentially an operating lease with a full maintenance package. This type of finance method generally allows for regular fixed monthly rentals to help with budgeting, cash flow and forecasting, and it leaves capital free for other essential business purposes. It provides you with the all-important use of a commercial vehicle, but without the responsibilities of ownership. At the end of the contract, simply hand the vehicle back. It can be an Ideal option for VAT registered larger fleet operators, as they do not have to allow for or anticipate depreciation costs and helps with forecasting tax liability. These rentals are usually 100% allowable against taxable profits.
Lease Purchase is a lease with the option to purchase contract. It is similar to a finance lease agreement. You essentially rent the vehicle for a stipulated contract period with an option to buy it at the end and with part of the rental charges credited toward the purchase price. This facility can have a balloon profile, which defers a large payment to the end of the contract, thus reducing monthly rental and aiding cashflow.
Full Pay-out Finance Lease can be a very tax efficient method of financing your van. A relatively small initial rental or deposit, (normally 3 monthly rentals or repayments in advance) followed by the remainder of the rentals or repayments over a set term. This can sometimes come with a choice of up to a 5 year term. If you are not VAT registered, it means that you pay the VAT monthly and similarly, VAT registered companies pay the VAT monthly, and claim it back quarterly. 100% of the monthly repayments are offset against taxable profits for the full term of the agreement. At the end of the term, you are legally obliged to sell the vehicle, as the taxman will not allow you the tax advantages of the lease as well as ownership of the vehicle at the end of the agreement. You choose who you sell the vehicle to, you negotiate the price, and then you pay the finance company up to 5% of the sale proceeds. You keep about 97%. Normally you would use the 97% of the sale proceeds that you have retained as the deposit on your next new van, but you are not obliged to do so and you can do whatever you want with it as it is your money. With this option, if you choose to part exchange your old van for a new van, which you can do at any time in the agreement, the supplier of the new van will request the settlement figure from your current finance company, and should the settlement figure be less than the market value of the part exchange, the difference can then be used as part or all of the deposit on the new van, whilst if the settlement is more than the market value of the part exchange, the difference can be added to the new finance agreement, but the deposit will then need to be paid in full. The new finance figures are calculated dependent upon the settlement figure and the new supplier would then pay the finance company the up to 5% of the sale proceeds of the part exchange vehicle to close the previous agreement. Should you decide you want to keep your old vehicle after the term of the agreement has finished, without selling it, you can request what is called a Secondary/Peppercorn Rental figure from your finance company, which you then pay annually instead of monthly, and it allows you to keep the vehicle for up to a further 2 years. This figure would normally be in line with whatever the monthly figure was during your finance agreement, but would only be paid once a year instead of once a month.
As you have read, there are some alternative finance options available. It is important to research which option will best suit your needs, so be sure that you understand the terms and conditions and discuss your personal/professional requirements with whomever you undertake a finance deal with.
At Low Cost Vans, our customers reap significant savings and have direct access to an unparalleled range of cost effective funding and service solutions. For business leasing, whether it's one vehicle or hundreds, we will assess each fleet on its requirements, using our specialist industry knowledge and experience to deliver a competitive solution. While those needing personal leasing, will benefit from discounts previously achieved only by large fleet buyers. Low Cost Vans are committed to offering a premium quality service for the duration of your agreement, not just when purchasing, so give us a call.
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