Purchasing a commercial vehicle outright can be a significant expense, and it makes financial sense to spread the cost of your purchase over time by financing instead. Not to mention, when you finance your commercial vehicle, particular agreement types with give you access to tax benefits not available when paying cash upfront.
Furthermore, choosing to finance your commercial vehicle frees up more cash in the short term, allowing you additional flexibility with other projects or investments. All things considered, financing is an invaluable financial tool that allows businesses to make larger purchases or investments without taking too much from their bottom line upfront.
So, let’s explore your options when it comes to financing your commercial vehicles…
Finance Lease
The idea of a finance lease for commercial vehicles is relatively simple and straightforward. The finance company buys the vehicle for the business, who then pays a fixed monthly fee to use it over an agreed term.
This type of leasing has no large initial outlay, and there are generous tax allowances available. Thus making this kind of leasing ideal if you’re looking to conserve capital expenditure or manage cashflow better.
Benefits of this agreement type include:
- VAT is spread throughout agreement term
- Choice of fixed rentals
- Rentals are tax deductible
- Improved cash flow
Hire Purchase
Hire purchase is a viable option for those looking to purchase commercial vehicles. The agreement outlines that you, as the buyer, would pay an initial deposit and then agree to make monthly payments for the remainder of the overall cost. This initial payment reduces the amount of credit needed from the finance company, leading to lower interest rates over the life of the agreement.
Unlike an operating lease, hire purchase allows you to own the vehicle at the end of its payments, but gives you rights to use it before that point. This can be a great option for businesses who need more flexible repayment plans and don’t want to tie up large amounts of capital all at once.
Benefits of this agreement type include:
- Ownership at end of agreement term
- Choice of fixed rentals
- Improved cash flow
- Interest on rentals is tax deductible
Sale & Leaseback
Sale & leaseback is an attractive alternative financing option for commercial vehicle owners. It involves selling a vehicle that you own and leasing it back from the buyer. Many businesses go down this finance route to maximize cash flow and preserve their cash to be used elsewhere in the business.
However, please bear in mind that sale & leaseback is only eligible for assets purchased within the last 6 months.
Benefits of this agreement type include:
- Release capital against existing vehicles (purchased within the last 6 months)
- Choice of fixed rentals
- Instant cash injection that will improve cash flow
Contact Us
Here at WestWon we have an expert fleet finance team that can source a finance agreement best suited to your business. With our industry leading rates and attentive customer service, rest assured you are in good hands. Give us a call today on 01494 611 456, or send an email to fleet@westwon.co.uk
See what commercial vehicles we can finance here.