None of us are going to trade out of this environment by standing still – but when you are looking at new or replacement vehicles for your business, you should conserve cash and use smart finance.
We work with expert partners who can not only source any make or model of car, van or pick up, but who can source the most suitable Lease or Hire Purchase (HP) deal for your company.
Whether you are looking for New or Used vehicles, a single vehicle or entire fleet – using the right finance for your company in this environment is the smart choice. Conserving cash within your business right now makes sense – none of us know what is around the next corner or when we will need a cash buffer.
Tax efficient, AND better for the environment?? There are a range of CO2 emissions bands, and your business can benefit from an increased offset against profit the lower the CO2 output of your business vehicles. We recommend that you take the advice of your accountant to understand the full benefits available to your company.
I’m sure that you can understand therefore that we have seen a shift away from diesel cars being commonly used for business – we have seen great interest in hybrid and electric models this year, and yes, Tesla is very much on the scene as a business car!
Our most popular deal is Leasing, or as it’s also called, Business Contract Hire – so how does this work?
- Lease the vehicle for your business for a fixed term, commonly between 2 – 5 years
- Agree a fixed monthly Lease payment at the outset for the term of the deal
- Set the annual contractual mileage when you take out the Lease
- A common optional extra is a maintenance contract over the same term, where for a fixed monthly cost servicing, replacement tyres, maintenance and repair costs can be budgeted for at the outset
At the end of the Lease term you hand back the vehicle, and subject to there being no excess mileage or outstanding damage to the car then you have nothing else to pay.
Businesses Lease their vehicles as a way to do their business – to deliver goods for example, or to get their sales people in front of their customers. So while the company won’t own the vehicle at the end of the contract – it will have paid for itself over the term by the business that it facilitates for you.
A Lease allows you to budget for the term that you have the vehicle, and not be concerned by the depreciation or fall in the resale value when the contract ends. The Lease payments appear on your Profit and Loss accounts as an expense.
How does Hire Purchase (HP) differ to Leasing?
In a nutshell, with HP you are spreading the cost of owning a new vehicle over an agreed term, but at the end you have an additional option to purchase the vehicle – something that you cannot do at the end of a Lease.
HP is accounted for differently, counted as an asset as if already owned on your Balance Sheet, and so you account for its depreciation.
Tax treatment of HP is something that you should confirm with your accountant is right for your business – and with HP your contract will include a final ‘balloon’ payment at the end of its term, a price at which you can then buy the vehicle outright.
- A company can plan to use the vehicle longer than the finance term – so by agreeing the ‘balloon’ payment at the outset the know from the start what the total cost of owning it will be
- With an HP agreement a company pays the VAT up front on the cost of the vehicle – which can be fully claimed back on commercial vehicles
- A ‘balloon’ payment is an option – the company can hand the vehicle back at the end of the agreed payment term without depreciation risk – it is not a compulsory purchase at that point!
How can Essex Commercial Finance help with you company’s vehicle requirements?
We are advocates of cash conservation in businesses in this climate and can work with our partners to provide you with options on sourcing vehicles, Leasing and Hire Purchase.
We can commonly achieve system based approval same day for single vehicle finance applications after submitting an eligible proposal, and for multiple vehicle or more complex applications we will support the information and document gathering, and liaise with lenders to ensure that they have everything they need to get your business on the road.
Please email firstname.lastname@example.org, or call us on 01245 979 100 to discuss how we can help your business with your vehicle finance requirements.