Buying a car used to be a simple matter of visiting your local dealer with a chequebook and coming back with the car you fancied. Nowadays, there is a wide range of financial schemes to attract buyers – and it can take some investigation to decide which one is best suited to you.
Consider carefully the cost, including tax advantages for each of the schemes. For example, sales or VAT may be reclaimable under some types of buying, but not others. Or there may be an advantage to your business to treat the vehicle as an asset on your company balance sheets by owning it outright. Consult your accountant for the best advice.
Even with a so-called “cash sale”, most business buyers don't purchase a company car with a suitcase of banknotes. They usually have some form of credit arrangement created separately from the deal itself. This may take more time and involve some transferring of funds, but usually offers the most competitive interest rates and great flexibility of repayment options. It also gives you the greatest bargaining leverage with the dealership.
Most dealers can offer an on-the-spot hire purchase scheme for ultimate speed and convenience. The interest rates will be high, but may be negotiable if you are a company buyer.
Traditional hire purchase arrangements also have the disadvantage that the car doesn't belong to the buyer until the last repayment is made. Until then, the HP company can reclaim the vehicle if payments are not kept
A more recent development – available through outside agencies, car brokers and dealerships – is the facility to “buy” the car for a set period, commonly two or three years.
Some of these plans can be very complicated. You pay a deposit, then a set monthly charge, which is much lower than the repayments of the total cost of the car. That's because after the set period, the car is simply returned to the dealer or you pay a lump sum to buy it. This lump sum – the guaranteed future value – will have been agreed at the start of the deal.
Under a leasing scheme, you never own the vehicle. Instead, you pay a monthly fee for a set period. Some schemes may include vehicle maintenance, which may be an advantage to the hard-pressed business user and a useful way of controlling running costs. Your mileage may be limited – for example, to 10,000-miles per year. Check whether the quoted prices include home delivery, car tax and maintenance.