Questions to ask when thinking about Vehicle FinancePublished on 16th April 2018 2018-04-16T13:44:52+00:00 - Last update on 1st July 2020 2020-07-01T22:08:06+00:00
For many businesses, having access to dedicated vehicles plays a vital role in their day-to-day operations. Whether you’re working in transport, construction, warehousing, haulage, catering or even in the veterinary sector, acquiring vehicles for your business is a major investment that can be difficult to handle on your own. So in order to receive access to the benefits that business vehicles have to offer, whilst minimising the strain on your finances, you could apply for Vehicle Finance. Applying for Vehicle Finance grants to you the ability to spread out the cost of acquiring business vehicles by allowing you to either buy or lease them over an agreed period. So if you’re thinking of applying for Vehicle Finance, these are just some of the questions you need to ask before submitting an application:
- Should I purchase or lease the vehicle?
- What types of vehicles can be financed?
- How is Vehicle Finance secured?
- What payment plans are available?
- How long are the terms?
Should I purchase or lease vehicles for my business?
This depends on the type of vehicle(s) that you’re looking to gain access to. If you’re not always going to need access to the vehicle in question or if it has a rapid depreciation rate, establishing either a Leasing or Contract Hire agreement could be economical. However, if the vehicle carries a high asking price, depreciates slowly or doesn’t need to be frequently replaced, setting up a Hire Purchase agreement could prove beneficial. Therefore, in order to make the right decision for your business, you need to take into account how frequently you expect to use the vehicle and how quickly it will depreciate.
What types of vehicles can I finance?
Whether you're looking for luxury vehicles, forklift trucks, dozers, combine harvesters, animal transporters or articulated lorries, Vehicle Finance offers you the means to acquire any type of vehicle you need in a manner that’s suitable for your business. If you aim to acquire a secondhand vehicle, keep in mind that you should always thoroughly inspect both the condition of the vehicle and the conditions of the agreement before signing.
How are Vehicle Finance solutions secured?
Vehicle Finance products are typically secured against the vehicles that you acquire as part of the agreement and doesn’t affect any of the assets that your business currently owns. Should your business default with payments, the lender will simply take back their vehicle. However, you need to consider how this may affect your business’ ability to operate, should this occur.
On the other hand, if you intend to establish an Asset Refinance agreement, you can present one or more your business’ unencumbered assets (equipment, machinery, vehicles or property), in order to release equity and gain a lump sum. Although this offers you a useful way of supporting the asking price for a vehicle or fleet, this does mean putting your assets at risk of repossession should your business default on the agreement.
What repayment plans are available?
Another aspect to consider is how Vehicle Finance is repaid. With Hire Purchase, after paying an initial deposit, you’ll be expected to make Fixed Monthly Repayments plus interest throughout the agreement. These repayments are calculated by taking into account the vehicle’s total asking price and spreading it out evenly over an agreed term.
Meanwhile, Leasing and Contract Hire both require you to make Fixed Monthly Rental Payments for the vehicle’s usage over an agreed term. These payments take into account the difference between the vehicle’s total asking price and its residual value at the end of the agreement. The residual value of the vehicle is, in turn, affected by various factors such as depreciation, mileage and its conditions. So, the higher the vehicle’s expected residual value, the smaller the fixed monthly rental payments will be as a result.
How long do Vehicle Finance agreements last for?
Plus, what also makes Vehicle Finance so useful your business is that it offers you access to a range of terms. Terms define the overall length of the agreement, which determines how the asking price of the vehicle(s) is spread out. What this means is that the longer the term, the less money you’ll need to pay each month. With many of products that are on offer through applying for Vehicle Finance, you could acquire an agreement that lasts up to 5 years. However, with Leasing, you could set up a 7-year agreement for a particularly expensive vehicle.
Could your business benefit from applying for Vehicle Finance?
Although vehicles offer a wide range of benefits to your business, they tend to carry a high asking price that usually needs to be paid upfront. This can often be more than what your business can handle and could cause cash flow issues for your finances. However, there is another way. If you need to introduce vehicles to your business, you could apply for Vehicle Finance instead. Vehicle Finance is an increasingly popular package for business owners who either want to purchase or borrow vehicles over an agreed period of time. So if you’re looking to reach out into new areas or introduce new services to your business, apply for Vehicle Finance today or find out more with Rangewell.
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