Keeping the Cash in the Business

Do you want a new van and system but can’t afford it outright?
Or maybe you can afford it but would prefer to keep the cash in the business?

Cash flow is all important when running your own business. But, having the right equipment to enable you to run the business efficiently is just as important. Buying a van mount system is a significant purchase, but did you know that there are options available to pay for it? Finance could be the way forward. Completely flexible, you can choose to finance either the system, your vehicle or the complete package.

How does it work?

Well there are several options available to you – Contract Hire, Hire Purchase or Finance Lease.

Contract Hire

Contract Hire allows you to make fixed monthly payments over an agreed period (typically 2-5 years). Easy to arrange, the monthly payments, interest rates and term are all fixed, so you know from the outset exactly how much the van and system will cost each month.

The good news? The cost of the vehicle and the system are included in the monthly payments. At the end of the contract the van is simply returned. However, you get to keep the system for the next van.

Hire Purchase

Simple to understand, Hire Purchase is one of the most common ways of funding a vehicle purchase and is normally a fixed cost, fixed period loan of money linked to (or secured) on the purchase of a vehicle.

Requiring a minimum deposit (usually the VAT) Hire Purchase is certainly worth considering if your company is VAT registered as you’re able to reclaim the VAT in your next VAT quarter. Furthermore, monthly payments are not subject to VAT as you have already paid all of the VAT upfront as the deposit payment. The vehicle will then appear on your balance sheet and 100% of your vehicle purchase cost can be offset against your taxable profits for the year.

There are, however, some disadvantages with Hire Purchase. You are only able to take ownership of the vehicle at the end of the agreement once the option to purchase fee has been settled. And, obviously, if you’re not VAT registered you won’t be able to reclaim the VAT. Hire Purchase is a dedicated funding product that does not include maintenance or any other value-added services. You must also have fully comprehensive vehicle insurance.

Finance Lease

As with Contract Hire, Finance Lease give you the option to finance both the system and van over a 2-5-year period. As part of the lease agreement you can choose to pay either the entire cost of the bundle package, including interest charges, or alternatively, you can opt to pay lower monthly rentals with a final payment based on the anticipated resale value of the vehicle (often referred to as a ‘balloon payment’). But, at the end of the period, you own both assets.

Added Benefits

Whichever route you go, leasing your van makes good business sense. But there’s another reason that it makes sense and that’s TAX. As we mentioned earlier, if you opt for Contract Hire and your company is VAT registered, you can claim back 50% of the VAT for the supply of the vehicle. On the other hand, if you choose Hire Purchase or Finance Lease and your business is VAT registered, you can claim 100% of the VAT payments. But there’s more good news. Even if you’re not VAT registered, you can still spread the VAT costs across the term of the lease by incorporating it into your monthly rental.

Changed your mind about finance and want to know more? No problem, we’ll be more than happy to help.
Just give us a call on 0800 098 8407 or email us at: enquiries@grippatank.co.uk