Ways to Finance a Car for Your Business
Financing a car for your personal use differs from funding it for your business. When it comes to buying a car, you know that you have three options – auto loans, hire purchases and personal contract purchases.
Though all these three options are available to you, even if you need a car for your business, you still have so many aspects to look over before taking the plunge. Each decision has a direct impact on your business. You cannot just jump the gun.
Whether you dip into a cash reservoir or borrow money, in both situations, the cash flow of your business will be affected. It is vital to ensure that you are able to hit the ground running despite a large chunk going out toward the debt payment.
It is undoubtedly not a cinch to arrive at a conclusion. It may take days, weeks or months. The good news is that there are many possible ways to finance a car for your business.
- Use the company’s cash
This is the easiest and most affordable option to buy a car. When you borrow money, you are tied with debt payments for a couple of months, but you do not need to worry about payments when you use cash.
Just withdraw funds from your company’s cash reservoir and pay upfront to a car dealer. You will get keys and ownership on the spot. In fact, when you have the cash to buy a car outright, you can haggle for a reasonable price.
Though the benefits outweigh that of other financing options like loans, you will still try to avoid it, and this could be because of the high opportunity cost. Before you dip into the company’s funds, you need to analyse what you will forego as a result of it.
For instance, if you do not buy a car, you can invest that money in a propitious project, which could yield a 10% return on the total cost invested. The opportunity cost will be the reward you would lose if you bought a car.
However, the opportunity cost cannot be calculated using details on the surface. It is likely that you would be able to trim down the production cost almost by half if you bought a car. Both profits and drawbacks should be evaluated to see if it makes sense.
Paying cash for the vehicle may seem a good idea to you as you can avoid interest payments, but it could cost you a lot more money in the long run. Be foresighted to make the right decision.
- Borrowing money
If you are looking to borrow money, bank loans will come in handy. Interest rates will be way affordable. Try capitalising on a good relationship with your bank to faster processing and get money at lower interest rates.
Banks will not be an option for you if you have a bad credit history. You can then finance your car with either online lenders or car dealers. Online lenders are quite famous for approving guaranteed car finance for bad credit at the most competitive interest rates.
Your turnover should be impressively high in order to be eligible for lower interest rates. If you have a start-up, you can still borrow money from them. You will have to prove that your business will go places. Create a business plan that shows how you will take your business to new heights.
Startup business loans for bad credit in the UK are available only when you convince a lender about your repaying capacity. The business plan does not need to be a bunch of a lot of papers. It should be brief about how you will generate revenues for your business.
If you finance your car with a dealer, you will be able to qualify for either a hire purchase or a personal contract purchase. The latter is the best option when you do not have to own the car or just need it for a specific period. At the end of the lease, you are supposed to take back the car.
The hire purchase does the same thing, but you will get the vehicle at the end of the contract.
Do not forget that you will have to arrange a deposit that you will pay upfront at the time of borrowing money. You must have at least 10% of the market value of your car as a deposit.
- Renting
Technically, renting is not financing a vehicle but can serve a similar purpose. When you do not have the cash to pay outright or borrowing seems out of the question, you can rent a car that you can use for your business. Being tied to a long-term rental agreement, you will be able to save a lot of money.
One of the most significant benefits of renting a vehicle for your business is that you do not need to worry about maintenance. Even though you will not get a brand-new car, it will be reliable. Not to mention, you will evaluate its condition before signing the agreement.
Further, renting is the best option for seasonal businesses. For instance, if you need it only during Christmas, you can enter into a rent agreement unless the festive season gets over. This way, you can save a lot of money throughout the year.
However, you will have to pay a fixed sum of money every month. This increases your operation overheads. All in all, it could be slightly expensive.
Take message home
To finance a car for your business, you will have to analyse which option suits you fine carefully. Do not forget to gauge the opportunity cost. Normal operations should not be affected at all by any of the funding sources you use.
If you are unable to decide, you can take advice from a financial consultant. Based on your business condition and goals, they will help you come up with the best piece of advice. If you have a start-up, you must be more careful when choosing a financing method.
Description: To finance a car for your business, you can use cash from your company’s resources and borrow money from lenders or car dealers.
