Businesses such as car rental companies, driving schools and chauffeur services thrive on having a fleet of high-quality vehicles.
Unfortunately, high upfront costs can make it difficult to buy the cars you need outright, especially when you need money left over to fuel and insure them. This limits the speed at which your business can grow, and the size it can reach.
To avoid these delays and quickly build a fleet of cars, many businesses instead use asset finance. This is a safe and effective option for growing your business. But as with any financial decision, there are a few things it’s sensible to consider before you sign.
How does car asset finance work?
A car asset finance contract lets you purchase vehicles from a range of suppliers by making small monthly payments, often with a fixed interest rate. To secure the loan, you offer the assets you want to finance or other existing assets of value as collateral.
If you’re unable to make payments, your lender can seize those assets to cover what you owe. That means there’s no risk of bankruptcy, unlike a regular loan. As such, this form of transport finance is a popular choice for small businesses and startups as well as established companies.
There are several types of car asset finance. For example, a hire purchase contract means you own the vehicle once you’ve made all the agreed payments. Finance leasing, on the other hand, ends with you returning the vehicle to the lender or extending your rental agreement.
Another option is contract hire, also called vehicle asset finance. In this case, the lender buys and maintains a fleet of vehicles on your behalf. And once your contract expires, they’re responsible for disposing of the cars.
Whichever type of car asset finance you choose, you get full use of your vehicles while you’re making payments. That means you can immediately put them to work earning money and growing your business.
What are the costs involved with car asset finance?
The cost of car asset finance largely depends on two factors:
- How much money you borrow
- The length of your term
The more money you borrow and the longer your term, the more interest you’ll pay. Your interest rate is determined by the lender, and can be affected by your credit score and history.
You may also need to pay a small upfront fee. And you may be charged for early repayment. So it’s important to thoroughly examine your car asset finance contract.
Regardless, the monthly repayments for a car asset finance contract are typically much lower than for a standard bank loan. That makes it a much more affordable way to expand your fleet and boost your profitability.
You typically have a lot of freedom to negotiate the amount and terms of your contract to suit your needs and means. And if you contact an experienced independent asset finance broker like Kane Financial Services, you can typically find far better rates and terms than those offered by high street lenders.
How long does car asset finance take to secure?
Before agreeing a contract, your lender will want to evaluate the likelihood that you’ll pay back your loan on time. So it can take up to 10 business days to put things in place. But if your business is well established with good finances, a strong credit history and all the necessary documentation prepared, you can secure car asset finance in just a few hours.
Be aware that the type of vehicles you’re looking for could also affect your wait time. If the cars you want aren’t available, they might need to be ordered before you can finalise your contract.
What type of security do I need for car asset finance?
Which assets you put up as collateral will depend on the type of contract you choose.
In some cases, the vehicle itself is used to secure your loan. But in others, you can offer other assets that you currently own.
Remember that if you’re unable to make payments, the assets you put up could be seized if you fail to make payments. So it’s best to offer assets you can afford to lose wherever possible. That said, if it looks like you might miss a payment due to unforeseen circumstances, you might be able to negotiate a period of leniency with your lender.
What are the benefits of car asset finance?
- Better cash flow management: Since car asset finance doesn’t involve large upfront payments, you can preserve working capital to grow or fund other areas of your business
- Superior vehicles: You can get top-of-the-line or luxury vehicles that you might not otherwise be able to afford, making your service more desirable to customers
- Highly flexible: Your finance contract can be negotiated to better suit your needs and circumstances, ensuring you always get a fantastic deal
- No risk of bankruptcy: Unlike a traditional bank loan, your collateral assets ensure you don’t face bankruptcy or financial turmoil if you can’t make payments
- No responsibility for upkeep: Under a contract hire agreement, your lender is responsible for maintaining and repairing your vehicles, and will even replace them for free if there’s a problem
- Preserve credit line: Car asset finance has no impact on your existing lines of credit, letting you meet other business needs with confidence
- Specialised knowledge: Niche lenders can make recommendations on the best vehicles and related assets for your business to support your success
Get market-leading finance deals with Kane Financial Services
The broker community often has access to exclusive deals that high street lenders can’t hope to match. So for more than 35 years, businesses throughout Northern Ireland and the UK have turned to Kane Financial Services for fast, safe and affordable growth.
Apply for asset finance online today and one of our specialists will contact you as soon as possible to discuss your car asset finance options.