Leasing

LEASING

Leasing a new vehicle gives your company a professional look and sets the standard for your image, adding sign writing costs to the monthly payment help to promote your business whilst it is being used.

Vehicles depreciate fast so why own one?

Ask yourself the question “Why are you taking a loan out and paying interest on it to buy a used vehicle that will depreciate faster than you can get a new one on lease at a very low price due to using the lease companies terms where they are paying up to 30% off list price on a new vehicle and are giving you interest rates lower than any bank can offer you”!

Get a new vehicle for the cost of an older one! see our example of 2 tradesmen for more information!

For all your vehicle leasing needs, visit our sister site.

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Example summary of John and Steve:

Lets look at the key facts below to help you understand that we are simply here to help you understand basic facts that tradesmen are ignoring everyday which results in losing money, stress, losing trade, poor business image, poor safety for themselves and there passengers, poor security for there livelively hoods tools etc etc

Name: John
Age: 30
Occupation: Carpenter
Salary: £58,000 Per Year
Tools Value: £5,500
Annual Mileage: 15,000

Current Van:
October 2016 16 Plate Custom 270 L1 H1 Limited 2.2 Tdci 125 PS Diesel Engine Euro 5 6 Speed Manual Gearbox in Silver with Signwriting, Security Locks, Plylining, Roof Bars and Alarm

John was unsure which was the best way to find his new Van back in 2016 but after speaking with his accountant he decided to have a 3 year Contract Hire.

Johns deal is just about to expire and the vehicle will be collected on the 30th October and he is going to have a new van on the same Contract Hire deal as it worked well!

Johns deal from October 2016 gave him a brand new Custom Limited which includes Air Conditioning, Bluetooth, Heated Seats, Cruise Control, Alloy Wheels, Metallic Paint, Heated Windscreen, Front Fog Lights, Electric Windows and Mirrors, Front and Rear Parking Sensors, Ply Lining, Roof Bars, Alarm, Security Locks and Signwriting advertising his businesses wherever he goes costs him £ 285.00 + Vat

He took the vehicle out on a 3 year deal, his deposit was £ 855.00 + Vat.

Over 3 years John has paid 1 x Deposit of £ 855.00 + Vat, followed by 35 Payments of £ 285.00 + Vat. The total paid in the 3 years is £ 10,830.00 + Vat

In 2016 John became VAT registered so was able to claim the VAT back on his van payments!

John has found VAT processing is very easy now he has had the correct advice and suddenly is noticing that consulting an accountant has helped him structure his business properly and increased his profit!

Over the 3 years John has incurred the following costs!

1) 1st service which included 1 year breakdown cover £85.00 + Vat
2) 2 Front tyres £140.00 + Vat
3) 2 Rear tyres £140.00 + Vat
4) bulbs £20.00 + Vat
5) 2nd service £160.00 + Vat
6) 2 Front Tyres £140.00 + Vat
7) 1 set wiper blades £20.00 + Vat
8) 1 afternoon work lost due to van breaking down and having to wait for recovery £100

Ford Assist recovery came out within the hour and arranged for a truck to collect my van and drop it off at the nearest dealer. I was given a courtesy van and swapped my kit over and went home.
The van did take a week to be fixed but because I had the courtesy van it meant I did not lose any work days!

The total spent on the van in the 3 years was £ 805.00 + Vat

If we add this cost of £805.00 to the cost of the vans rentals £ 10,830.00, the total paid out is
£ 11,635.00.
This figure divided by 36 months is £323.19

The van averages 35mpg on combined journeys

Johns old Transit used to average around 32 mpg so through the 3 years he’s saved around £600 on fuel

The new van was also cheaper to insure by £80 per year as its fitted with many security features!

So although the van is costing an average of £323.19 per month, John is saving £18.88 on average per month from the £800 saving on fuel costs and the £80 saved in insurance!

This brings his net monthly equivalent down to £304.31

This makes the new van a cheaper option to Steve’s used van!

Name: Steve
Age: 38
Occupation: Carpenter
Salary: £45,000 Per Annum
Tools Value: £ 4,000
Annual Mileage: Steve covers around 15,000 Miles per year

Current Van: 2011 Registration Ford Transit Base Model in White with 150,000 Miles. His Drivers Seat edge is broken and its uncomfortable but he has not got round to getting it fixed!! It causes Steve a bit of back ache at times and hes had to have the odd day off work and treatment for Sciatica!
(Steve has spent over £100 with the chiropractor and missed a couple of days off work the one week costing him £400!)

The van is tatty to look at with visable dents and areas of rust and is never clean which gives Steve a bad appearance when he arrives at a customers address to do a job.

Steve bought the van in January 2016 with a personal bank loan as it was the best deal he could find himself with a low interest rate! (unknown to Steve the rate at the bank was dearer than a rate applied to Johns lease van!) But being a carpenter he would not have known this!

The van cost Steve £ 7,995.00 + Vat £ 1,599.00 which totals £ 9,594.00

The interest on the bank loan over 3 years was £ 1,151.28

Steve spend 2 days off work looking for the perfect van and this was the best one he could find. ( 2 days off work cost him £400 in lost wages)

I asked Steve to list his repair bills from over the last 3 years, here they are below.

2 New Front Tyres November 2016 £158
New Battery November 2016 £ 114, Lost a day of work getting it fixed £ 200
MOT March 2017: £ 321 which was for new Front Discs and Pads, a service, the MOT test and new wiper blades
Wheel Bearing May 2017 £ 140 lost a day at work £200
Broken into August 2017 and had £4000 tools stolen, had to get a loan to pay £4500 for new tools, there was damage to the rear doors which cost £250 to be fixed and the insurance did not cover the cost of the stolen tools and it was not worth Steve claiming for the damage on the doors as his excess was £250 anyway! Lost 2 days at work £400
January 2018 Breakdown and recovery £ 75 with EGR Valve problem that cost £ 240 to be fixed and Steve again lost a day at work costing him £200! This happened the week after Christmas which was a very bad time to be paying out for unexpected repairs!
MOT March 2018: Welding, 2 rear tyres, various bulbs and MOT test £ 220 Advisories were rear brake pads and front wheel bearing!
May 2018: Service and Front wheel bearing £ 220
July 2018: Rear Brake pads £ 75
August 2018: Steve could not get in the back of the van when he arrived on site! He had to cut a hole in his bulkhead and climb through into the back and manually open the side door! Turns out the central locking had gone down resulting in him losing time in the morning as well as having to damage his van. It was later fixed at a local garage on a Saturday morning at a cost of £ 175! Again Steve lost a day at work costing him £200

Steves van after owning it for 3 years was worth £1500 in February 2019

When we look at what Steve paid for his van, then add the VAT he paid, the interest charge, the repair and general maintenance work costs, the cost of the missed days off work, the cost of recovery and then the cost of depreciation on the value of the van from £7995 down to £1500 we have the actual cost of ownership Steve has incurred by choosing to buy a used van.

Depreciation from = £ 7,995.00 to £ 1,500.00 = £ 6,495.00
Vat on £ 7995.00 = £ 1,599.00
Interest on the loan = £ 1,151.28
Lost pay = 8 days over 3 years = £ 1600
Repairs and Maintenance = £ 1,913.00
Breakdown = £ 75
Annual breakdown cover for 2018-19 £80

Total cost not including VAT £ 11,314.28

This means Steves van has cost him £ 314.28 + Vat per month!

So basically Steve has been paying £ 314.28 + Vat per month without knowing it to drive around in an old van when he could have had a New top of the range one with the latest technology and security including deadlocks to help stop tool theft as well as full livery to advertise and promote his business and help get more work with no hassle or unexpected costs!

Benefits of Leasing:

Capital and security

Van contract hire incurs a monthly fee whereas buying requires an initial outlay whether it be the full vat on the vehicles price on a Hire Purchase agreement or the full amount should you want to own the vehicle outright.

This can be difficult for a companies cash flow that do not have the spare capital available or have plans to use the capital it in other areas of the business like expansion or keeping an emergency fund for managing a downturn in revenue.

As we enter uncertain economic times through the 3rd and 4th quarters of 2019 these two factors are very big for companies looking to make decisions!

Maintenance Costs

The upkeep of the vehicle and the avoidance of unexpected costs can be achieved by taking out maintenance packages on the leased vehicle. Again allowing businesses to forecast costs more accurately.

Lower Running Costs

Leasing a new vehicle will give you a vehicle with very low running costs, new technology in engines help to give you the best mpg or you can look at Hybrid or all Electric vehicles to ensure your business vehicles are running as cheaply as possible.

Covered by the manufacturers warranty and breakdown cover changing the vehicle on a strict cycle once this expires using a lease funding method means you are really keeping problems, downtime and repair bills to a minimum!

Benefiting from new legislation

The government’s revised road tax laws and levies on CO2 emissions has bumped up the price of owning a vehicle. With manufacturing prices likely to rise when Britain leaves the European Union, the price of buying a van for your business could be £thousands more expensive.

Annual running costs could also rise for van owners with older vehicles – which may ultimately force businesses to purchase new vehicles or opt for the cost-effective solution of van business leasing.

Lease is a great way to be able to take advantage of these benefits and avoid unnecessary costs like congestion zone charges etc

Cost Management

The costs of a van contract hire are fixed in the terms of the agreement. You, therefore, have a predictable monthly outlay which makes it easier to manage your expense accounts. Furthermore, there should be no unexpected costs to fork out if the vehicle breaks down when its covered under warranty

Tax Relief

Business owners are entitled to 100% relief on VAT on van rentals. Furthermore, if you use a van solely for business, and not privately, drivers are not subject to company car tax.

For drivers that have access to their van for personal use HMRC also offers businesses a fixed BIK rate (Benefits in Kind) which is currently £3,170 (tax year 18 / 19). If you are in the lower income bracket of 20% you will pay a flat rate of £633 per year.

For all your vehicle leasing needs, visit our sister site.

Choose Vehicle Leasing

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01827 894860

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TELEPHONE

01827 894860

info@commercialvehicletrading.com

WORKING HOURS