Financing New Equipment & Vehicles - Which way is best?


“Taking the plunge with a new set up can be quite a stressful decision. Making sure everything is to the right
specification, let alone working out how best to pay for your new van or system is bad enough. On top of this,the jargon used in the finance world to explain the various funding methods available can leave you scratching your head."


This is what one of our customers had to say. We took some time out to catch up with our vehicle and funding partners to ask them what it all means.

Leasing, Hiring, or Outright Purchase- which is better?

It depends on what your looking to get out of the purchase. 

What is contract hire?

In simple terms, Contract Hire is a method of funding the USE of a vehicle for a set period of time, but not the overall ownership (or cost of ownership) of it. It allows a customer to choose the vehicle they want, use it for a set period of time and an anticipated mileage and then give it back to the leasing company at the end of the period of hire.

This product is the most inexpensive way to ensure your vehicles and equipment are kept new and are replaced regularly. If you want to have 3 - 5 years of trouble free motoring with maintenance, road fund licence, and breakdown cover all included, this is a good option.

Pros:

  • Breakdown cover included as standard with Ford
  • Maintenance packages can also be included for the vehicle
  • Road fund licence is also included in the monthly costs
  • Simply hand back at the end of term and replace with a new vehicle, keeping your vehicles
  • Rentals are 100% tax deductable
  • Very low outlay (the deposit can be as little as 3 months payment up front)

Cons:

  • Need to be aware that further costs may apply at end based on the mileage and condition of vehicle
  • Both the vehicle and the system are handed back at the end of term if the system has been included in the contract hire package. However, you can place the system under a lease instead so that this is owned


What is finance lease?

Finance Lease is a form of flexible leasing to fund the use, but not the ownership, of a vehicle and is ideally suited for VAT registered businesses. The leasing company hires the vehicle to the customer for an agreed period of time and for an agreed monthly sum. Providing any balloon payment has been paid, at the end of term:

  • the customer can return the vehicle back and be given the surplus from the sale of the vehicle
  • The Lease Company receives the full sale proceeds and refunds the customer a fixed percentage of any surplus that is generated as a rebate of rentals
  • The Customer can continue to use the vehicle for as long as they want on payment of an annual secondary period rental (commonly known as a peppercorn rental). This is normally the equivalent of one monthly rental.

Pros:

  • Minimal capital outlay (can be as little as 3 payments)
  • No excess mileage or wear and tear costs.
  • Sell the vehicle at end of agreement and sales proceeds are returned to you
  • Tax and VAT advantages may be available
  • Can be listed as a leased asset on the company balance sheet

Cons:

  • It can be a tricky process if you wish to keep the vehicle at the end of the contract instead of replacing it with a new vehicle contract
  • Its possible to transfer ownership to you, but normally there is a cost to this


What is hire purchase?

This product is pretty similar to Finance Lease, but with a lower payment structure which defers final payment at the end of term. You can transfer ownership of the vehicle to yourself once all payments have been made and a transfer of ownership fee has been completed.

Pros:

  • No complicated hand over at the end of the term if you wish to own the vehicle
  • Final balloon payment can be increased to reduce monthly costs

Cons:

  • Too large a balloon payment at the end of agreement can catch you out, or force you to sell the van to cover the cost if you are not prepared and have not planned correctly


My credit score is pretty good, is that good enough?

Credit score is a important factor in getting approved for finance. If any previous bad debt or CCJs are still showing on your profile, this can affect your chances of approval. However, the main interest of response finance companies is affordability. Can you afford the monthly costs? Can you prove this by the cash flow on your bank account?

What sort of deposit do I normally need to place?

This will depend on your credit score and overall package value, as well as the type of finance your going for. As a rough guide:

  • Vehicle and System Contract Hire - minimum of 3 payments up front as a deposit. This could be as little as £700-£1200
  • Vehicle Finance Lease - usually deposits will be around £1000-2000. You can put a higher deposit down and have a lower monthly payment or end payment
  • Equipment Lease - depending on which finance finder is used, and if your credit score is good, you usually will not pay a deposit at all. Some brokers will ask for 3 payments up front.


How long can the term be?

Depending on the approval offer, you can spread the cost over 1 – 5 years on equipment and 3 – 5 years on vehicles.


Do I have to pay two separate monthly payments for the van and system?

Not at all. Both of GrippaTank’s vehicle supply partners can include the system as part of the vehicle package so you just have one simple monthly payment. The arrangement is completely flexible as well, so if you have a limited amount of savings, you could part pay for some of the equipment or vehicle and then finance the remaining balance.


What our customers say

"Having spent many hours, days, even weeks, sourcing vans and installing systems, I can safely say
purchasing a one stop solution through Grippatank has proved to be an excellent decision. The quality
of product and service is extremely good and I will continue to use this method in future"
– John, Ideal Window Cleaning.


Summary

Different finance products suit different customers. Ultimately, if your company has the funds to purchase all new vehicles and equipment outright, and you prefer that method, you will likely get a very good package discount. Especially considering GrippaTank offer Ford Discount Terms to all customers purchasing a system.

WCM spoke to some of GrippaTank's customers and they were paying around £200-300 a month for a vehicle and system
package on contract hire, so it's certainly an affordable solution.


All finance is subject to terms and conditions and each individual's/company's credit score. Always seek financial advice before taking out credit.