Car Loans: Options for Business Financing

When you are a business with a need for company vehicles that are required by your employees, there are a number of options available for acquiring a car. These options are here to enable you to improve your working conditions, without having to invest a great amount of money immediately. These options can save you both time and money, as your payments are reduced to a small amount of money monthly or weekly. The options that are mostly available are: hire purchase, car lease and novated lease. These will all be explained further in this article.

  • Car finance lease

This is the basic kind of lease that is also available to the ordinary persons, except that it differs that here the business loans the car, and not the person who drives it. It is a form of an agreement about renting the goods (in this case vehicle or vehicles) from the owner (a car distributor, financial institution, or some third party). The agreement states the amount of money to be paid, which is based on the projected value of the car, and the amount of time for which the vehicle in question will be rented. The essence is that the ownership of the car rests with the owner, and at the end of the leasing period the car should be returned to the owner.

However, there are options to make some other kind of agreement where at the end, the customer has the possibility to purchase the goods at the price of their projected value, trade it in for another vehicle on a replacement or make an extension to the agreement for a longer period of time.

The agreed price is paid in equal monthly installments, and usually these installments cover the price of insurance for the car, and certain other benefits, that would raise the amount of money you spend on your vehicle, besides for buying gas. It should be noted also that while the ownership of the car rests with the owner, the company is responsible for paying the taxes for the vehicle, as long as that vehicle is used for making profit for the company.

  • Hire purchase

Hire purchase is also a kind of a rental agreement between the owner and the business, but it differs in one major characteristic, after the rental period is over and all the terms of the agreement have been met the ownership of the vehicle is automatically transferred from the owner to the business. During the rental period and the time during which the agreement is standing, the ownership resides with the institution that provides the goods, and the taxes are again deductible from the business’ income. However, with this kind of agreement, there are ways to lessen the tax you pay for the vehicle, by claiming the depreciation of the goods and the interest that is being paid against your business’ income.

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You also have an option of making a deposit at the beginning, or paying a balloon payment at the end of the agreement that will lessen the amount of money that you pay monthly, or you can structure the installments in a way that you cover the whole price within the rental period. There is also a possibility to trade in some previous goods for reducing the price.

  • Novated car lease

This kind of leasing is becoming a more and more interesting alternative for the businesses to obtain new vehicles for their employees. When it happens that your business leases the car on a hire purchase or ordinary car lease for an employee, and that the employee leaves during the rental period, the company is then obliged to rent the car until the end of the agreement, even if that car is no longer used. This can prove quite a hassle for the income of the business, and so the businesses turn to the novated car lease.

In this kind of agreement, the employee that wants to have a company car leases the car from the financial institution signs the financial agreement with them. Then another agreement, called the Novation Agreement, is signed between the institution that lends the goods, the employer and the employee, which states that the goods will be paid on monthly basis by the employer, as long as the employee is working for him. In this way, when the employee leaves the company, the responsibility for the car lease is transferred to him, and the business has no other obligations towards the vehicle in question. Again, all other options available to the previous types of agreements, are also available for this type.

Car loans are a great way to make your working conditions better, and to make your business more attractive for new employees, should you need them, without having to invest much money immediately. They will make your employees happy, and make your business more prosperous.

Michelle Lee:

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