Are you thinking of investing in a new fleet for your business? Funding a business fleet could prove to be pretty challenging. It could be a vital business decision that could have a far reaching effect on the time that is devoted by you to operate your business, manage all monthly outgoings and complete business value.
When you buy a fleet, you acquire assets that could be added to your books and could also, be sold for recovering part of your investment, in future. However, you are well aware of the fact, that the values of vehicles are bound to go down over time once they are used. Also, there is a lot of cost involved in the running and upkeep of the fleet, you must think about alternative ways of payment before committing to anything.
Contract Hire Could be the Right Option
Contract hire could be pretty fruitful as you may hire your fleet by paying a fixed monthly amount for an agreed tenure and annual mileage. For instance, you may hire a fleet of cars for a three year lease plan that expires after 60,000 miles. You need to hand over the car back to the supplier as soon as your lease period is over.
While leasing out a brand new vehicle, your supplier would point out the precise conditions you would require for returning the vehicle in. This includes the mileage and the state of the car. Once your contract period is over, you may opt for a new contract involving a fresh round of cars. Visit leasequit.com for more detailed information.
Contract Purchase Could Prove to Be Useful
Contract purchasing is considered to be halfway between leasing the car and actually buying the car. It is almost same to contract hire, but is functional as only a conditional sale. This works perfectly for small organizations that are looking for cars that are beyond their budgets. The golden rule of business is to buy it if it appreciates and lease it if it depreciates. Contract purchase is your best bet for staying away from financial loss associated with decreasing value of your business fleet with passage of time.
Finance Lease May Be a Smart Option for a New Fleet Company
A finance lease operates same way as a contract hire. However, the basic difference between the two being the fact that even though you are actually, leasing the cars, the maintenance, risk and management of your cars are solely your obligation and responsibility.
This seems to be a smart choice for brand new fleet firms as they would be adding the value of the vehicles to their balance sheets. This helps to boost their business’ net worth. The final payment is determined as per the residual value of the fleet. You are expected to exercise better control in case of financial leasing. This is so because you get a fixed invoice every month and you need to make just a single payment.
An ECO (Employee Car Ownership) Scheme Works Well
Under an ECO scheme, an employee is allowed to have the ownership of the vehicle. This works somewhat this way- you fund your vehicles through a payment plan which involves tax savings and mileage reimbursements adhering to HMRC-approved rates. The employees are to make payments to cover all maintenance costs. Your savings will scale on the basis of the size of your business. Employees do not receive any tax benefits as the HMRC views these vehicles as privately owned.
Something worth considering here is that most ECO schemes are very complex. You should know what you are getting into, so ensure that you are getting sound legal and financial counsel. You will have to ensure that every scheme is approved by the HMRC, monitor mileage levels, and also understand that cars cannot be reallocated.
The Salary Sacrifice Scheme Could be Very Useful
Another common employee ownership scheme is the salary sacrifice scheme. This has a basic operating principle, insomuch that the employee surrenders or sacrifices a portion of his salary to facilitate the purchase of the vehicle. You are eligible for savings through National Insurance and Income Tax.
This is a great option for business owners, as you can get tax benefits, and also be eligible for discounts and special rates from manufacturers and contract hire agencies, under the salary sacrifice provision. Each scheme could come with great benefits, including repair, accident and servicing packages. This could make your company more attractive to prospective employees as well, and boost retention rates.
There are several things you will need to consider, and several charges which you will have to incur for the maintenance and deployment of your fleet. It is important that you make an informed decision so that you do not regret it in the future.