FOR many businesses whether large, medium or small, having a car for staff is essential. They are needed for long journeys to attend conferences, meetings, workshops, events and are great for carrying a group of employees together. But how should you finance your car fleet?
Company cars are brilliant for branding as you can have them wrapped with your logo and brand, but if you are looking for get a fleet of cars, what is the best way to acquire them? Is it buying them straight out, or leasing them or getting them on car finance.
Contract hire leasing
At the moment, the most popular way for businesses to acquire a company car is to do it through contract hire leasing. Business contract hire (BCH) is when a business leases from an organisation for a set period of time (2-5 years) and with a specified annual mileage.
The business pays an initial deposit – although there are no-deposit agreements available – and then continues to pay agreed monthly payments for the remainder of the agreement. At the end of the agreement, the company simply hands the cars back to the lender.
BCH is popular because it removes the risks of ownership such as depreciation and the eventual sale, however, they do miss out on the benefits of car ownership including lower maintenance costs and the possible upturn in residual value for the vehicle or vehicles.
Over half the cars acquired for business use are done so through the Business Contract Hire deal.
As a business, there is the easy option of buying the cars outright. This solves many issues as you don’t have to worry about monthly payments, or interest rates and you have full ownership of the vehicles.
However, this is only possible if you have a large pot of money set aside for the purchase of cars. If you do not, it can be expensive to buy a fleet of cars all at once. You also have to deal with the issue of depreciation, which could mean you face having to sell the cars for substantially less than their original cost.
Business contract purchase
There is a third option of how should you finance your car fleet when it comes to acquiring cars for your business, apart from purchasing outright or car leasing and returning it later. You can purchase your fleet of cars on finance. Business Contract Purchase (BCP) is a combination of buying outright and Business Contract Hire.
It works in a very similar way to Business Contract Hire in that you place an initial deposit and then pay monthly payments for an agreed period of time. There are a few differences; for example, you do not need to state how many miles you are planning to do a year for the vehicle.
Because you will be the legal owners of the car rather than the lender, you also have to pay road tax on those vehicles as well.
This option is, however, the most flexible plan available because at the end of the period, the BCP allows you as a business to either pay a lump sum at the end to own the vehicles yourself. You can also upgrade the vehicles on to another BCP agreement.
The third option is that you simply sell the car back to the finance company, very similar to how you would have returned your vehicles when your Business Contract Hire agreement ends.
If you are interested in car finance, the best way to see how much it would cost to finance a fleet of cars for your business is to check on a car finance calculator.
You simply need to know what your planned monthly budget is for acquiring each separate car to see which cars you can afford. From there you can work out what type and how many cars you can afford.