Although nowadays significantly fewer companies purchase their cars rather than taking the leasing route, which in most respects is a far simpler option, there are still companies that do. Why is this? Well in some cases a company is cash rich and sees no point in using any form of finance for their company vehicles. In a minority of cases it can be that the company cars are going to be doing such high mileage, that purchasing appears more attractive.
Nevertheless in the majority of cases leasing, or contract hire as we tend to call it in the UK is by far a simpler option for most companies. The biggest downside of owning a company vehicle is the worry as to what it might be worth when it is three years old (this is when most companies dispose of their company cars); it prevents companies from effectively planning their finances, because how can they accurately access future values?
It's very difficult, who could have predicted the oil price in 2008 and the effect it had on some of the larger cars, or the dramatic downturn in world economies that followed shortly after. CAP which is used extensively as a guide in the motor finance industry is very accurate when it comes to predicting future values but they can only base their predictions on what is known at the time.
The same applies to leasing companies; they try to take everything into account when it comes to residual values. Sometimes they get it right and on other occasions they suffer huge losses. So why don't they build a large margin into the price to allow for what may lay around the corner and hit residual values? The answer is simple; the contract hire market is such a competitive business that they cannot do this and still retain market share, the market is very price sensitive.
Purchasing a vehicle from a main dealership is just as easy as ordering a vehicle from a contract hire company; both will normally have a three year warranty and both will be delivered to the company's door. However when a company owns its vehicles disposing of them can be far more time consuming and problematical; in order to avoid the significant reduction in value caused by part exchanging or disposing of the vehicle in the trade, a car has to be prepared for sale, advertised and someone in the company has to deal with the enquiries.
There can be a lot of comfort in having fully budgeted motoring costs; knowing at the outset what a vehicle is going to cost, right down to the last penny, which is just not possible when purchasing a vehicle.
It is astonishing that companies will invest something approaching 500,000 in a fleet no more than thirty cars. Some companies that buy their vehicles do use some form of car finance; finance lease or rather less popular now, hire purchase but the concerns with regard to future values remain.
Taking into account the considerable advantages of contract hire it is not surprising that increasingly companies are opting for this method of acquiring company vehicles. When it comes to financial planning it stands head and shoulders above vehicle purchase and when a maintenance contract is added, it can significantly reduce the amount of staff time that is spent managing the company car fleet. - 15224
Nevertheless in the majority of cases leasing, or contract hire as we tend to call it in the UK is by far a simpler option for most companies. The biggest downside of owning a company vehicle is the worry as to what it might be worth when it is three years old (this is when most companies dispose of their company cars); it prevents companies from effectively planning their finances, because how can they accurately access future values?
It's very difficult, who could have predicted the oil price in 2008 and the effect it had on some of the larger cars, or the dramatic downturn in world economies that followed shortly after. CAP which is used extensively as a guide in the motor finance industry is very accurate when it comes to predicting future values but they can only base their predictions on what is known at the time.
The same applies to leasing companies; they try to take everything into account when it comes to residual values. Sometimes they get it right and on other occasions they suffer huge losses. So why don't they build a large margin into the price to allow for what may lay around the corner and hit residual values? The answer is simple; the contract hire market is such a competitive business that they cannot do this and still retain market share, the market is very price sensitive.
Purchasing a vehicle from a main dealership is just as easy as ordering a vehicle from a contract hire company; both will normally have a three year warranty and both will be delivered to the company's door. However when a company owns its vehicles disposing of them can be far more time consuming and problematical; in order to avoid the significant reduction in value caused by part exchanging or disposing of the vehicle in the trade, a car has to be prepared for sale, advertised and someone in the company has to deal with the enquiries.
There can be a lot of comfort in having fully budgeted motoring costs; knowing at the outset what a vehicle is going to cost, right down to the last penny, which is just not possible when purchasing a vehicle.
It is astonishing that companies will invest something approaching 500,000 in a fleet no more than thirty cars. Some companies that buy their vehicles do use some form of car finance; finance lease or rather less popular now, hire purchase but the concerns with regard to future values remain.
Taking into account the considerable advantages of contract hire it is not surprising that increasingly companies are opting for this method of acquiring company vehicles. When it comes to financial planning it stands head and shoulders above vehicle purchase and when a maintenance contract is added, it can significantly reduce the amount of staff time that is spent managing the company car fleet. - 15224
About the Author:
Should you have any queries or questions with regard to Fleet Management, Licence checking, Contract Hire, Personal Contract Hire, Lease Purchase or vehicle Hire Purchase, please do not hesitate to contact us. Bowater Price plc 01494 536 536. www.bowaterprice.com.
