Businesses Find Used and New Car Finance the Perfect Remedy
Businesses bought more new and used cars on finance in August this year compared to the same month last year, according to the latest figures.
Statistics from the Finance and Leasing Association show that businesses spent some 30,146 on new car finance in August, up 3% on last year, while the number of used cars acquired by businesses on finance grew by 51% to 5,293 used cars in the same month.
New car finance has proved popular with businesses throughout 2017 due to low interest rates and attractive finance deals. As a result, over the last 12 months UK businesses have bought more than half a million new cars (513,616) using some form of finance – and it’s a similar picture in the used car market.
Used car finance grows rapidly
In fact, the growth is even more dramatic in the used car finance market. In the last 12 months, used car finance has grown a whopping 35% year-on-year, with businesses acquiring some 58,848 used cars this way.
That trend was also continued in August, with the number of used cars acquired by businesses on finance growing by 51% to 5,293 used cars.
And in the three month period to the end of August, the numbers of used cars acquired by businesses on finance grew by 54% to 17,534, compared with the same three month period of last year.
David Foster, managing director of Anglo Scottish Asset Finance, commented:
“We have seen growing numbers of business customers use our finance solutions to acquire their new vehicles, rather than relying on outright purchase or other historic solutions.
“They are attracted by the low finance rates, the flexibility that is available and the fact that there is no need for a large cash outflow at the start of the contract.”
What about the private market?
In the consumer car finance market, while the value of new car finance increased year-on-year, the number of new cars acquired by private individuals on finance fell slightly.
For the 12 months to the end of August, private customers acquired some £18.356bn worth of new cars through car dealerships, up 4% on the previous year, although the volume at 1.002m was 3% lower.
In August, private customers spent £817m on new car finance, up 2% on August 2016, but the volume was again slightly lower at 45,728 new units.
Why is car finance so popular?
It’s not difficult to see the attraction of finance in both the new and used car markets as a means of funding vehicles.
To begin with, it means no immediate drain on valuable cash-flow – the lifeblood of all businesses – as repayments can be funded from expenses rather than requiring a significant upfront capital outlay.
Also there is a plethora of car finance methods available that are suitable for the needs of most businesses.
A funding specialist, like Anglo Scottish, can provide funding solutions for all vehicle needs which are suitable for not just cars but for vans and commercial vehicles, too. Solutions include:
With fixed monthly payments, the ability to pool mileage across the fleet of vehicles and no concerns about disposal or depreciation, contract hire is the perfect solution for businesses looking to acquire new vehicles. Servicing and maintenance and tyres can also be included for added peace of mind. At the end of the agreement, you simply hand back the vehicle to the provider, and contract hire another.
Business Contract Purchase
With Business Contract Purchase, a business makes a fixed monthly payment based on a fixed contract term and an anticipated mileage. A final payment is set at the beginning of the contract based on the predicted future value of the vehicle at the end of the contract, and the business can either buy the vehicle, sell it and settle the residual amount, or simply return it.
Hire purchase is a type of asset finance solution that brings exceptional flexibility, with flexible deposits and fixed monthly payments, typically over one to five years, that make budgeting very straightforward. Ownership of the vehicle only passes with the final payment and until that point the vehicle is still owned by the finance company.
Finance lease is a popular and tax-effective solution for businesses needing new vehicles where contract hire is not suitable and where there is a requirement to show the asset on the balance sheet. It offers flexibility and tax advantages to eligible companies that don’t have the accessible funds to pay for them up front. VAT on repayments can be reclaimed – up to 50% on cars and 100% on commercial vehicles – and the repayments offset against taxable profits.
As part of a finance lease agreement, the business can choose to pay either the entire cost of the vehicle, including interest charges, over an agreed period. Alternatively, there is the option to pay lower monthly rentals with a final payment based on the anticipated resale value of the vehicle – the ‘balloon payment’. Throughout the agreement, the vehicle remains the property of the finance company until the balloon payment is made when it can be continue to be used for a peppercorn rental.
Personal Contract Purchase (PCP)
For individual car buyers, a PCP is a popular form of new car finance which bring flexibility and freedom of choice. At the start of the contract, the customer pays an initial deposit followed by fixed monthly instalments. At the end of the contract there is a final balloon payment which is due if you wish to keep the car, although this isn’t the only option. If you don’t wish to pay the final balloon and take ownership of the vehicle, you can simply return the car or use any equity in the car to build into a contract for a new car.
Personal leasing offers drivers who do not want to own their car the opportunity to benefit from a company car experience, but without the cost of a taxable benefit. Personal Leasing allows the driver to make fixed monthly payments that can include routine servicing, maintenance, annual road fund licence, tyre replacement and roadside assistance.
As a solution, it can be a good option for staff who have chosen to take a car allowance, or for those who are not eligible for a company car.
If you would like more information on new car finance and used car finance from Anglo Scottish for both businesses and individuals, then please get in touch.