A Guide To Vehicle Finance
These days, most businesses pay for their vehicles through a financial plan, rather than buying them outright. This is because vehicles are expensive and financial agreements can be more tax efficient. The problem is that vehicle finance can be complex because there’s so much to consider. In this section, we’ll help you to understand more about how car finance works, why car finance works, and what car finance is best for you and your business.
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These are the most important factors that will influence your car or van purchase decision:
- Your financial status, including your credit status
- How long you’ve been in business
- Your business plans and goals
- The nature of your business
- The type of vehicles you need and whether you need to customise them
- Company’s legal structure (sole trader, partnership, limited company etc.)
- How long you need the vehicles
- Whether ultimate ownership of the vehicles is important to you
- Your attitude to financial risk
- The likelihood you’ll need to terminate the agreement early
- Whether or not you’re happy with mileage restrictions
- How frequently you want to change your vehicles
Each type of vehicle finance plan has its benefits and downsides regarding monthly payments and total costs, flexibility, and tax implications. So, before you make your decision, it’s crucial to seek professional advice to ensure the method you choose is right for you and your business.
The information here is just an introductory guide, and you shouldn’t use it to make your final decision. For independent advice to help you make the right decision, contact Ram Automotive today.
Leasing
Long-term rental is a flexible way to get on the road and your agreement can be for as little as a few months. You’ll probably need to pay at least three months’ rent upfront, initially –
followed by fixed monthly payments. Your monthly payments will be based on the vehicle you choose, your likely mileage, how long you want the vehicle for, and any extra services you need – such as servicing, maintenance and repair. When the contract is over, you simply return the vehicle. Your business won’t ever own the vehicle, and you can’t buy it at the end of the contract.
Leasing is a bit like long-term rental. But typically you agree to use the car for a longer time – for between two and five years, rather than possibly just a few months. Leasing is great for those looking for fixed-cost motoring and to drive something they couldn’t otherwise afford. After paying your deposit, you make fixed monthly payments, which essential cover the depreciation on the vehicle. Your payments will be based on the vehicle you choose, how long you want it for, and your likely mileage. Leasing tends to be more cost-effective than long-term rental. Reasons for this include likely tax benefits and the fact that the monthly payments reflect depreciation. Once the leasing term has finished, you will not own the car – but in some cases, you will have the option to buy it.
