Funding the fleet: How we helped a vehicle hire business save
Most of us take out finance when we get a new car. There are plenty of options and opportunities for negotiation. But what about when we need to bring in a fleet of vehicles?
Most businesses need vehicles. Whether it is a single van, a fleet of artics - or in the case of a client we helped recently, a fleet of luxury cars - we can help find the most cost-effective funding to get you and your business on the road.
Our client was a car hire specialist needing to extend its fleet, and replace some of the older vehicles it already owned.
“Our business focusses on providing replacement vehicles for insurance companies – giving their customers a car when their own is off the road for repairs or replacement. We work in the quality end of the market and need to provide a vehicle that will be acceptable to demanding drivers, and which will keep its value. We decided that we needed 15 S-class Mercedes to fit in with our plans.”
This scale of order – which would be in excess of £500,000 – is rather larger than most dealers can realistically accommodate. Our client knew from experience that the best deals could be secured if they could offer a cash payment for the cars they needed, and arrange the funding for a specialist lender.
“It means keeping costs down. We know dealers can make a profit on selling finance. By going direct to the lender, we are not paying extra to line their pockets.”
The most obvious solution is not always the right one
There are plenty of solutions that can help a business afford vehicles, and most are based on Asset Funding. This means that the asset – the vehicle or other equipment – acts as the security for a loan. If the business cannot make repayments, the lender will simply repossess it and sell it to cover their losses. This means that the risk to the lender is reduced – and this reduced risk can be reflected by a reduced interest payment.
However, the scale of this loan meant that lenders would look very carefully at the circumstances, and there was a problem.
One of the directors of the business had some CCJs registered against him, and the business had been late with some VAT payments. These were shown up on the credit records of the business and immediately raised red flags.
Lenders always base their lending decisions on the risk that they will not be repaid, and any irregularity in a credit history can be a problem. If the lender sees the business has had problems with payments in the past they may only make a loan offer with a high rate of interest, or even refuse to lend at all.
Our client discovered that the lenders he approached were not helpful.
“I knew I would be looking at an increased charge for credit thanks to the problems we have had in the past. What I didn’t expect was that we could not find a lender prepared to do business with us at all.”
He discovered that the scale of the borrowing he needed was also a problem. He could find lenders who might be prepared to work with them to provide the funding to buy a couple of cars, but the cost of buying 15 meant that they would be exposed to a potentially damaging loss if things went wrong. The lending criteria for most lenders would mean that they simply could not provide the level of funding required.
“We could not grow the business without growing our fleet, and we could not even continue to serve our existing premium customers if we could not offer quality new vehicles. It looked as though we were going to have a very serious problem.”
The client approached Rangewell for a solution.
A financing solution
We understand the vehicle finance market and have a range of solutions to minimise the cost of financing a vehicle fleet. These can include Hire Purchase or a range of leasing plans. Contract Hire can be among the most suitable for luxury vehicles, as it allows funding to be arranged on the purchase value less the estimated value of the vehicle at the end of the agreement. This helps keep the monthly repayments down and makes it simple to switch to a new vehicle at the end of the agreement.
However, in the case of our current client, we saw that a standard solution would not be able to offer the scale of funding they required.
Our solution was to make use of our relationships with many lenders across the entire lending market. We approached several, and discussed the maximum exposure each one would be prepared to take on a vehicle loan.
This allowed us to set up a series of loans with the most suitable lenders. Each one would cover the cost of 3-4 cars.
Splitting the funding in this way allowed each lender to limit their risk, and to meet their own lending rules. They were able to provide the cash our client needed.
“I had arranged the very best deal I could for cash with a main dealer, and when it looked like we could not provide the cash, I was very disappointed. As soon as I spoke to Rangewell, I saw there was a solution, and that we could move ahead.
It’s not something that you could set up yourself - we needed Rangewell to take care of it for us.
If business goes to plan, we will be upgrading the rest of our fleet over the next six months.”
At Rangewell, we work across the whole of the lending market. It means that we have the expert knowledge to help you find the most competitive rates for all types of Vehicle Finance - and the ability to provide innovative solutions if you have a particular challenge.
We put our knowledge to work for you, finding the most competitive deals for the equipment you need, from a single van to a complete HGV fleet.
If you are ready to get your business going further, give our experts a call.