Ways to finance

By Bradley Thurgood
Ways to finance

I have been running this business for over 25 years and have seen some clients make good and bad decisions when it comes to funding. 

I have had friends suffer sudden illness and been locked into agreements they could no longer afford. Clients insisting that a contract hire agreement of their Range Rover is a wise move, then seeing their company car tax bill. 

It is easy to get sucked in to a cheap rental and worry about the consequences after, but the reason we are still here after 25 years, is we work with clients to make sure they receive positive outcomes.

Things to consider if funding as a company vehicle

The key consideration is the Co2 emission, whether you are looking to purchase or lease a vehicle.

If you are purchasing only vehicles with a 0g/km output qualify for a 100% 1st year allowance.

1 to 50g/km fall into the 18% pool 

51+ 6%

If you are leasing then 0-50g/km = 100% of rentals allowable

Anything higher = 85% allowable.

What does this mean for the company car drivers personal tax?

You just can't beat electric vehicles for Benefit in Kind Tax.

0g/km = 2% 

If you imagine a £50,000 car and it was electric you would have a BIK of £1,000 to pay tax on at either 20 or 40% per annum.

If that same £50,000 car was petrol and had a Co2 of lets say 130g/km you would be paying tax on £15,500 at the appropriate rate

Ways to finance a company vehicle

The most common way we find these days for company cars is contract hire, with finance lease being popular for commercial vehicles as businesses are happier to deal with wear and tear at disposal.

There is also lease purchase which can suit a business that is not VAT registered or financing commercial vehicles where the VAT element of the vehicle can be reclaimed in one return.

There are many factors which should influence the way you fund your vehicle and we would be happy to offer free help and advice.

What about personal vehicles

We generally would look at either a Personal Contract Hire or Personal Contract Purchase agreement.

Personal Contract Hire

This should be looked at like a long term rental agreement, it can include full servicing, maintenance and tyres and gives you fixed cost motoring for the term of the agreement. The only increases that can incur are if road tax is increased by the government, you will be billed the difference, or if VAT is increased from the current 20%, rentals will likewise adjust.

This is an extremely popular form of finance, but does have some disadvantages:

  1. Early Termination can be expensive
  2. If you return the vehicle and have exceeded the contracted mileage, an excess mileage charge will be applied.
  3. You will never own the vehicle.

Personal Contract Purchase (PCP)

This form of finance is great if you would like the option to own the vehicle. It also can be a little less punishing if you want to end the agreement early. Unlike Personal Contract Hire where early termination is generally calculated as 50% of remaining payments, a PCP settlement looks at the balance of finance outstanding less an appropriate rebate of interest. Hence we can always look to purchase the vehicle from you and settle the outstanding finance, and with luck pay you any equity.

Equally as with any form of finance, there are disadvantages you need to consider:

  1. Road fund licence is generally only included for the first 12 months of the agreeement.
  2. If you return the vehicle and have exceeded the contracted mileage, an excess mileage charge will be applied.

As with any client, our job is to talk to you, consider your circumstances and the outcomes you are looking for and offer a finance product to suit.

Please call us on 01277 354777 to discuss your requirements, or message us via Contact Us.