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Car Finance Options For Small Business Owners

Thoughts from the Business Godparent ...



The Society of Motor Manufacturers and Traders have just announced that the UK new car market declined in the first month of this year. 163,615 cars were driven off forecourts in January, a -6.3% fall compared with the same month in 2017 ...

There are a number of car finance options for small business owners!

There are a number of car finance options for small business owners!

copyright: aprior / 123rf stock photo

The Society reported that demand fell across the board, with registrations by business, private and fleet buyers down -29.7%, -9.5% and -1.8% respectively. Meanwhile, continuing the trend of recent months, dual-purpose cars such as SUV's were the only vehicle segment to see growth, with demand up 6.6% to account for a fifth (20.2%) of all new car registrations.

"Demand in all other segments fell, with the biggest declines affecting the mini, MPV and executive segments!"

I confess I was surprised by the decline as five of my clients independently turned to their Business Godparent in January, an increase of 100% compared to January 2017, to seek advice on the purchase of their new car/van.

I even spent most of last Sunday in a dealership an hour's drive away ordering a new vehicle at the best discount and the car wasn't even for me! The choice of paintwork wouldn't have been mine though; magnetic blue - where do they get those names from?

So the most common questions are these:

  • Do I go for diesel/petrol/electric?

  • How should I pay for the vehicle?

I shall leave the fuel debate to another time as technology is improving by the day.

You would think paying cash would be simple, wouldn't you? I can assure you that these days it's not if you want to get the maximum discount.

"So you are left with either finance as the option or contract hire!"

I personally do not favour the latter as you pay a fixed monthly sum over a fixed period. Yes its good for budgeting and you can pay a little extra to include the maintenance, road fund licence and recovery, but it's for a fixed period and so what happens if your circumstances change before the fixed period is up?

I have also had clients stung by excess mileage penalties and penalties for paintwork chips. The traditional finance route gives you more flexibility as you can get a settlement figure and pay off earlier if need be.

An option that has become the most popular finance package, and which is currently worrying the Chancellor of the Exchequer, is the personal contract purchase (PCP). This is in effect a long-term rental agreement in which you have the option of buying the vehicle at the end of the agreement with a guaranteed value agreed at the outset.

For those wishing to purchase through a company, the vehicle will be included in your accounts as an asset and tax capital allowances will be available. The allowances will vary from vehicle to vehicle depending on the cost and CO2 emissions, so it's not straightforward. It's also important to remember that the benefit in kind may be costly to you from a tax perspective, so its vital to seek our advice.

There will be some of you who don't like the thought of taking finance out but remember there is a fourteen day cooling off period and those fourteen days may just be enough to negotiate that discount!

"And if you don't have a credit history then there really is no hope!"

If you'd like to find out more about car finance options for small business owners then do call me on 01908 774320 or click here to ping over an email and let's chat through your options.

Until next time ...

Business Godparent

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More about Roger Eddowes ...

Roger trained at Edward Thomas Peirson & Sons in Market Harborough before working at Hartwell & Co, followed by Chancery, as a partner. He started Essendon Accounts and Tax with Helen Beaumont in 2014 as a general practitioner with a hands-on approach.

Roger loves getting his hands dirty, working with emerging, small-to-medium and family businesses to ensure they receive the best possible accountancy advice. Roger utilises an extensive network of business contacts to leverage the best guidance and practical solutions.