If you are thinking of adding another vehicle to your business’s current fleet, or replacing one unit, or even if you are thinking of getting your first business vehicle, it is worthwhile to consider the available financing options.
Sometimes, small and new business owners stall when it comes to getting a vehicle for their venture, thinking that they are not ready in terms of financial capacity. As such, they miss a lot of potential opportunities that could make their businesses grow.
If you are keen on getting a vehicle for your business, one lease finance option you should carefully consider is a commercial hire purchase or CHP.
In a CHP, a third party purchases a vehicle on behalf of the business owner. In turn, the business owner remits monthly payments to the financer for a set period of time. Essentially, the business will hire the vehicle from the business owner. Upon the expiry of the contract term and when the price of the vehicle, plus other associated fees, has been paid, the ownership of the vehicle is turned over to the business owner.
But why should you consider this route when you are adding a vehicle to your business fleet?
CHP offers several advantages that are well worth considering. For one, contract terms are flexible. Depending on the financial capacity of your business, you can choose contract terms that are anywhere between a year and five years.
With CHP, you know the costs in advance, and the monthly payments, interest rate and other costs involved are fixed. This will allow you to know beforehand whether you can truly afford a vehicle. On top of that, you can carefully plan your expenditure by adding these items to your budget.
In CHP, deposits, in the form of cash or trade-in, may be used. Furthermore, businesses can take advantage of tax deductions because the vehicle will be used for business purposes. On top of that, no general sales tax or GST will be levied on the monthly or residual payment. If you have registered for GST, you can claim GST on the vehicle’s price as well as the interest and other associated fees.
If you opt for the CHP route, the GST is payable on the price of the vehicle as well as the charges involved. The GST is then paid once the contract has been settled. The GST can then be paid upfront or may be added to the loan.
CHP is perfectly suitable for businesses which account for their GST either on a Cash or Accruals basis.
Portman Asset Finance are the UK’s number 1 Lease financing experts