August 10, 2017

4x4 pickups boost vehicle leasing in the demolition industry

For years, the 4x4 pickup was nothing more than a workhorse, a functional vehicle designed to simply get the job done. Not any more. With Double Cabs built for any purpose, and a noticeable improvement in base specifications, their popularity has significantly increased.

From a work point of view, there’s the flexibility to carry a wide range of loads and the option to protect cargo and improve the aesthetics of the vehicle with accessories such as load covers and hard tops.

Come the weekend, the weekday worker becomes a comfortable family car that’s driven out of choice rather than necessity. This is particularly true of models such as the Mitsubishi L200, Nissan Navara, Toyota Hilux, Ford Ranger and the VW Amarok, all of which are now taking the 4x4 pickup to a whole new level.

A tax efficient replacement for your company car.

The functionality and flexibility of the pickup means that they’re also fast becoming a first-choice company car for many within the construction and demolition industries.

One of the key drivers to this is their tax efficiency. As most pickups are considered light commercial vehicles (LCVs), they are taxed differently to conventional company cars. Simply put, Benefit-in- Kind (BIK) is set at a flat rate, irrespective of CO2 emissions or price.

To illustrate the point, take a look at the comparison below, which shows a potential tax saving of over 47%.

What about vans?

It’s not just 4x4 pickups that are on the rise, van leasing has been steadily increasing for a number of years, and we have recently seen a 10% year on year growth as companies look to reduce their compliance burden by ditching their smaller HGVs in favour of vans.

This is clearly seen within the demolition industry, as more and more companies are switching on to the benefits of leasing rather than buying vehicles outright. There are a number of reasons for this, but in general it comes down to flexibility, predictability and control.

Leasing contracts are flexible because you can choose in advance how long you want the lease to run for and the mileage your likely to do. Predictability comes from being able to fix both your finance payments and your maintenance bills for the duration of the contract. This means there’s no nasty shocks or unexpected repair bills to worry about for anywhere up to five years. And finally, control comes from the fact that you are limiting any financial exposure and being able to divert funds to be used elsewhere within the business.

Having said this, it’s worth remembering that the most popular form of leasing, Contract Hire, has its downsides as well. For example, should your situation change during the course of the contract and you no longer need the vehicle, a early termination fee would be payable to the finance company.

Additionally, whether or not the contract runs to term, once the vehicle has been returned, it will be assessed for damage. Any defects which are not considered ‘fair wear and tear’ will need to be repaired at your cost. And, whilst the assessment is carried out in line with BVRLA (British Vehicle Rental and Leasing Association) guidelines, the finance company, or their appointed representative, will decide on the level of additional cost to be paid.

As an alternative, companies with highly variable needs, as well as those who tend to run their vehicles quite hard, often prefer a different type of financial arrangement known as Finance Lease.

Under such an agreement you get the best of both worlds, with ownership benefits such as taking advantage of the equity that’s built up in the vehicle, whilst at the same paying the sort of low upfront payments normally only associated with leasing. Also, VAT is only charged on the rental payments and not on the initial cost of the vehicle itself.

There are two main options with Finance Lease. You can choose to pay lower monthly payments and leave a large amount to be repaid at the end of the contract, which under normal circumstances is financed by the sale of the van. Alternatively, you could decide to pay more each month and then look to recoup up to 95% of the vehicle’s final value when it is sold at the end of the contract. In other words, there’s no financial risk to the business during the contract term, and you get a share of the sale proceeds at the end. However, are there no voluntary termination rights with a Finance Lease, so you need to go into the agreement with your eyes open.

Deciding on the best way to finance any vehicle depends on a wide variety of facts, including whether you are looking to minimise risk, initial payments, in contract payments or are looking to keep your options open in the months and years ahead.

As specialists in business and personal leasing for both cars and commercial vehicles, The Vehicle Partnership can help you understand all the different options so that you can make a decision that’s right for you and your business.

Julian Tyson
Managing Director, The Vehicle Partnership

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