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Welcome to the Swiss Guide to Van Finance. Which method works best and for whom. What happens to VAT, and which type of finance suits which type of business
No Van Finance -Simply Cash – We do cash deals
Traditionally many customers think the word “Cash” opens a magic door on price but the reverse is often true in vehicles.
Most manufacturers give additional discount/ support on finance deals. This support can run into thousands and thousands and its better to “hide” this support since it preserves future resale values.
Manufacturers such as Fiat for example that offer say 50% off are plagued by poor resale values. The saying is “todays discount is tomorrows depreciation”
Cash purchases are depreciated in the same financial year thus if its a new start company whats the point if there is no profit?
On the other hand if a company has a huge tax bill it does make sense.
Consider HP/Lease Purchase over cash as discounts are often greater.
– Great for customers who are credit blacklisted
– 100% depreciation for Tax in same financial year
-Lower discounts sadly generally speaking
– Pre registation is a popular way to try and get to the same discounts as other van finance methods
Van Finance – Hire Purchase
Hire purchase is very similar to a cash purchase and the van is depreciated in the same year.
If there is a balloon or a large final payment then its known as lease purchase.
Traditionally the VAT must be paid upfront but this has been relaxed in recent years. HP suits VAT registered businesses and ownership is automatic at the end of the deal.
– Payments 12 months – 72 months
– Many vans are pre registered as discounts higher
No customer to date has ever rung up and asked for our “2nd best ” figure
– VAT upfront or VAT not upfront
– With a balloon or without a balloon
– Sadly very few manufacturers give additional discount this way, but we do at Swiss.
– HP will be more expensive per month in terms of monthly payment.
This is a combination of smaller or no balloons, less support from manufacturers.
– Pre registration is sometimes used to get better discounts comparable to Finance Lease for example.
– PX or sell at any stage. No penalties.
-Automatic ownership of the vehicle at the end
– Great for super high mileage drivers
Van Finance – Lease Purchase
Lease purchase is a form of HP usually with some form of final payment.
Different finance companies calculate the final payments in different ways. Some use current auction values as a guide, while others work to a percentage of the original value.
– Similar to HP
– Balloons possible to reduce the monthly payment which is the main objection to HP.
– Interest rates are often higher than finance lease.
-VAT paid upfront. Less scope to pay the VAT later.
– PX anytime you wish
– Automatic ownership at the end
– Great for Flat Rate VAT customers
Van Finance – Finance Lease
Finance lease is easily the most popular method for van finance for companies running less than 10 vans. Its supported by manufacturers
in terms of they often give back end support/ greater discounts. Manufacturers prefer to support this over other methods as it preserves resale values which is something they strive for. Many super large fleets base their decision more on whole life costs thus, to achieve volume and market share its essential.
Small deposits that vary from one payment in advance to 50% of the vehicle price.
-Small deposits 10% ideal. Larger & smaller possible
– VAT paid monthly and claimed back quarterly
– Manufacturer supported deals and discounts
– PX or settle at any time after 12 months
– Flexible balloons from zero to auction value
– Buy the van at end with a paperwork exercise & a third party
– No milage penalties but you have to be honest with yourself over the size of the balloon. More miles means a lower PX price in the future
– If you improve the vehicle you get to keep the profit. Some finance companies charge a percentage of this so its best to check .
– Keep the van longer with a “peppercorn” in an emergency
– Often there is equity in the vehicle at the end giving you a small profit. This obviously is only the case if its within milage, serviced well and looked after. If it isn’t its down to you but there no penalties as such.
VW Transporter Finance Guide
Van Finance – Van Contract Hire
This is what van contract hire and what it isn’t. Its a method for funding a vehicle with controlled costs. Its often thought there is no credit check but that isn’t the case. It works best on basic vans and in large numbers. For example if you have a fleet of 100 vans, and 100 drivers and want to say rack them all out, add graphics, incorporate service costs then this method is great. Its a little more expensive than the other forms of finance. Very few people actually consider that many customers are in positive equity in finance lease and contract hire will deny you the opportunity to take this profit. It also means you need to keep finding deposit
-Low deposits from 1 payment upfront
– No disposal worries
– Easy to budget
– Mileage is restricted by your own choice
– You cannot buy at end
– You cannot end early
– There is a finance credit check.
– Suits basic vans
Van Finance Credit Checks
Typically there are two main types of van finance credit check. One for private individuals and sole traders and one for limited companies who have accounts.
Private individuals and sole traders.
What the finance company are assign is your ability to pay and it will always be based on your personal credit rating. They use in most cases automated software which is fed from Experian for example. They look for patterns and measure whether or not you keep up with payments.
Each individual has a maximum limit and for example as you grow and have say 3-4 vans it gets harder and harder to get credit on these.
Sole Traders Wanting more vans
As your company grows its essential that this can be measured. A lender will ask for accounts, management accounts, bank statements. This is highly typical.
Limited companies must submit accounts on a regular basis and the underwriter will base the decision on two things.
One is your net worth on companies house. The nigher the better, thus a company with a low net worth or one under say £100,000 will always struggle to get credit. Some lenders will ask for a company guarantee, others simply say a flat no. At Swiss ask the sales person the best way to apply for credit as sometimes we cannot reapply if you are refused.
The second way to make a decision is based on your company credit score. They will measure everything as they do in a personal score
Since a van is a commercial vehicle you can often get the VAT back. There are some exceptions however. If the payload on a Kombi wagon is less than 1000 KG then you can’t, or if its more of a car like a Caravelle.