Vehicle Funding

Company vehicles are an essential tool for most businesses; they can be expensive to own and operate so it is important to select the most appropriate vehicle funding method for your situation. Each of these methods have various features and benefits depending on an organisation’s operational objectives, accounting and cash flow requirements.

WestWon Fleet can offer various forms of vehicle funding; we will consider any request from our clients and will look to advise and assist you. Below are explanations of the three most popular forms of vehicle funding:

Contract hire

This is the most popular type of vehicle funding with approximately 60% of businesses choosing this method. Contract Hire provides a car to a lessee or user for a set period of time and a pre-determined mileage, in return for a fixed monthly rental. There is no option to purchase the vehicle and it must be returned at the end of the vehicle funding contract to the leasing company.

The monthly charge for a contract hire vehicle is broken down into two parts; one part is called the ‘finance’ rental and the other the ‘service’ rental.

The ‘finance’ rental will take into account the cost of the car, road tax, its period of use, agreed mileage and forecast residual value (the estimated price for the vehicle at the end of the contract). Vehicle mileage will have a great impact on the finance rental as the total mileage has major implications for the residual value.

Understating the mileage will reduce the monthly rental, however this may result in excess charges at the end of contract if the contracted mileage is exceeded. The choice of make and model of vehicle can have a big influence on the rental also. Two cars can have identical list prices, however one may have a much higher forecasted residual value so this will be reflected in a lower monthly rental.

The ‘service’ rental covers a range of additional services that the lessee can specify to their requirements

Pros

  • Fixed Cost-Motoring
  • Frees up capital
  • Off balance sheet
  • Steady cash flow
  • 100% of VAT reclaimable where vehicle only used for business (pool vehicle)
  • 100% of the maintenance is reclaimable
  • Rentals are usually Corporate Tax deductible
  • Additional line of finance that may not affect banking arrangements
  • Reduces issues of vehicle ownership

Cons

  • Mileage and Term need to be correct at the outset of the contract, otherwise charges may apply
  • No option for vehicle ownership
WestWon Limited – WestWon Fleet is a trading style of WestWon Limited. WestWon Limited is a credit broker and not a lender. Registered in England & Wales with company number : 05282535
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