Asset finance
Asset finance can offer many of the benefits of other options – and more.
For example, Hire Purchase is a straightforward repayment facility which enables you to ultimately own the asset. Payment patterns can be tailored to suit individual needs, generally involving a deposit followed by a series of periodic instalments over one year to five years. You may also delay paying some of the car’s cost until the end of the agreement by structuring a balloon payment.
Asset Finance - what is the best option?
Hire Purchase - Variable Rate - Balance Payments Plan
Balanced Payment is a finance option with the advantage of fixed monthly payments and the lower cost of variable rate. However, unlike Hire Purchase, where the interest is fixed, balanced payments plan track changes in the base rate. As rates fall or rise over the period of the contract, so does the interest charge you pay. You pay an initial deposit, and repay the balance in fixed monthly payments over an agreed period. At the end of the term any variation of interest is reconciled and will be settled as either a credit to you, or a charge. Alternatively, the term can be shortened or extended.
Hire Purchase
Hire Purchase is a straightforward repayment facility which enables you to ultimately own the asset. Payment patterns can be tailored to suit individual needs, generally involving a deposit followed by a series of periodic instalments over one year to five years. You may also delay paying some of the car’s cost until the end of the agreement by structuring a balloon payment.
Finance Lease
If your business is registered for VAT, there may be good financial reasons why leasing is for you. You retain full use of a vehicle for an agreed period of time for an agreed periodic rental. It offers all the practical benefits of ownership without any of the potential burdens.
Contract Hire
If your business prefers to hire rather than own vehicles this could be the solution. Contract Hire enables you to concentrate on your core business activities, while avoiding the financial risk and administrative burden of owning a vehicle fleet. With payments over one, two, three or four years, you get to drive your chosen vehicle without ever having to consider its value in the future or how to dispose of it.
Contract Purchase
Companies who want to own their vehicles, but avoid the risk of depreciating assets often prefer this option. This method of funding is ideal if you cannot fully reclaim VAT and is particularly suitable for financing the more prestige vehicles on the fleet. You have the option to purchase the vehicle at the end of the contract period. Alternatively you can return the vehicle to Capitas.
Fleet Management
Should you prefer ownership or other financing solutions rather than Contract Hire or Contract Purchase fleet management offers an extensive range of management services. Effectively you elect to take on the complete financial risk associated with ownership of the fleet, including asset and maintenance risk. The administrative functions are outsourced. A fleet management fee is charged per vehicle per month, with fleet costs charged back to the company on an actual cost basis.
Sale & Leaseback
Purchasing a vehicle fleet ties up valuable cash resource at the front end and involves the risk of unpredictable resale values at the back end. By selling the fleet and leasing it back, your company will benefit from fixed monthly costs and the elimination of residual value exposure – which means you can budget more effectively.
Manufacturer Sales Aid Finance
Many dealers offer hire purchase, leasing or contract hire or contract purchase schemes, sometimes at subsidised interest rates; even 0% for limited periods on certain models. You make fixed repayments over an agreed term and will eventually own the vehicle when the agreement terminates.
However it pays to consider the total costs involved – could you get the vehicle cheaper elsewhere? Are the monthly payments within your budget? What are the servicing costs? Can you get a replacement vehicle if it needs repairing? What will the resale value be when you want to replace the vehicle and what about disposal? You may find that alternative finance options give you more flexibility and control, at a lower cost.
Bank Borrowing
A business loan or personal loan can be easy to understand and arrange.
You should however think of your longer term borrowing requirements.
Is borrowing for the car likely to restrict your ability to borrow for other purposes while the loan is outstanding? To borrow for assets on an overdraft rarely makes sense unless your cash flow is particularly strong.
Cash Purchase
Simple and straightforward – and you may be able to negotiate a good price.
You will also own the vehicle, so you can sell it and recover some of the purchase costs at a later date.
If you do buy the vehicle outright, remember that your expenses do not end with the purchase price. Depreciation is a real problem – many vehicles can lose up to 70% of their value within three years. You will also need to consider additional charges such as servicing, maintenance and the cost of breakdown or damage. And if you sell, the cash price or trade-in value will depend on the market at the time and cannot be guaranteed.
Company Vehicles
Everyone knows it’s important to keep company cars and commercial vehicles up to date and working efficiently for your business.
But you wouldn’t be the first to worry about tying up valuable capital in a depreciating asset.
The answer is simple:
Finance solutions that offer simple, fast and flexible ways for you to acquire vehicles in a more affordable manner.
Follow the links (left) to view the options.