Finance Products
Every person you talk to about financing a van or car will give
you a different opinion; the “accountancy professionals” will wrap
it up in jargon and leave you none the wiser and the marketing men
will always show the lowest possible monthly, weekly or even daily
cost but not give you the full picture. Below are a few notes to
help you.
Cash
Lovely if you can afford it, however, could you use the money you
are spending more wisely by investing in your business? If
you are VAT registered you can claim the VAT back in one lump at
the end of the next quarter. 100% van on vans and 0% on cars
reclaimable.
Hire Purchase
You pay a deposit and then the balance at an agreed period at a
fixed rate. At the end of the agreement you own 100% of the
vehicle. Most finance companies require all of the VAT in advance
and with the credit squeeze additional deposits may be required. On
a £11500 Van with a 10% plus VAT deposit you will need
£3487.50. Still the most widely used form of funding, great
if you can afford the deposit. However are there better solutions
for your business? Normal tax write down rules apply, (Lease
Purchase, PCP and Contract Purchase are all forms of HP designed to
reduce the monthly payment, but require the settlement of a final
payment or balloon at the end of the agreement).
Finance Lease
This can have substantial cash flow benefits. You can start with as
little as 3 months rental in advance (That’s from as little as
£730.80 plus VAT on an £11,500 Van). You claim the VAT back each
quarter as you go with no sudden drain on your business’s cash
flow. You can have a lease from 24 to 60 months and use options
including a balloon payment to reduce your monthly outgoings. At
the end of the agreement, you sell the vehicle and keep the
proceeds, or use them to fund the deposit on your new van, subject
to a final fee. Provided you can settle the outstanding
balance on the agreement it may be terminated early. VAT is
100% reclaimable on vans and 50% reclaimable on cars.
Contract Hire
For tax, VAT and deposit purposes Contract Hire works the same as a
Lease. The agreement will have contractual conditions regarding
mileage and use and can include a full service contract and other
support services. Go outside of those conditions or return the
vehicle with damage and you may have a bill at the end of the
agreement. You cannot terminate a contract without penalty. If you
can predict the use of your vehicle(s), require a full service
agreement, or need a complete package to support an employee based
in the field, Contract Hire has great benefits at a fixed price. At
the end of the agreement you hand the vehicle back. The agreement
will not show as a debt on your accounts.
2010-2011 Tax Allowances, Purchased.
- Cars CO2 up to 110gm/km, 100% first year allowance, 111 to 160
20% PA on a decreasing balance, 161 and above 10% on a decreasing
balance basis.
- All vans 40% first year, followed by 20% PA on a decreasing
basis. All finance fees and interest charges are 100%
allowable.
2010-2011 Tax Allowances, Leasing or Contract Hire
- Cars on a lease or contract hire basis: 0 to 160gm/km 100% of
rental 160gm and over, 85% of rental.
In Summary
All Business Users are different. One size does not fit all. Anyone
can take almost every finance example and make it look cheaper, but
this normally means deferring costs to the end of the
agreement.
This is not how Northern Motors do business, we believe that
anyone with a good credit history will be able to enjoy the benefit
of any of our advertised finance offers.
The best advice of all… talk to Bob Templeman at the Northern
Motors Vauxhall Business Centre on tel: 01923 813023 or email
bobtempleman@northernmotors.co.uk.