WHEN the time comes to buy a new van it’s essential to find the most suitable way for your type of business to fund it.
At the time of purchase there may or may not be some vantastic deals out there but there are certainly a number of different ways to pay for the new vehicle.
One of those is contract purchase. So what is it?
Contract Purchase is for business customers looking to fund a new vehicle in a manageable way. A little like hire purchase.
The monthly payments are not subject to VAT so it’s useful for non-VAT registered small businesses. However a contract purchase agreement is often provided with an optional service package which will be subject to VAT.
Contract purchase funding is ideal if you want to have options open at the end of the contract or you’re unsure where your business requirements might be in three or four years.
The low down on contract purchase
- Advantages: Low initial payment;
- Fixed monthly payments so you can budget against income;
- No depreciation concerns if you want to walk away at the end – the finance firm guarantees the value;
- Maintenance and servicing can be included;
- Cost effective
- Disadvantages: Not VAT efficient
- You’ll need to find additional finance if you want to buy at the end of the agreement
You make an initial payment when you take out the contract, then make fixed monthly payments and finally have an Optional Final Payment at the end of the contract. This means:
- You can keep the van by making this final payment
- Trade-in your vehicle at a dealership and take another vehicle from them or
- Simply return the vehicle to the funder.
So as we said before, contract purchase is highly flexible and a good way to keep your options open.
Contract purchase case study:
When fashion publicist Adam Wilkie decided to branch out into delivering fresh, hand-picked flowers to customers in central London, he picked the Mercedes-Benz Sprinter.
The FLOWERBX Sprinter is financed by a contract purchase agreement with Mercedes-Benz Financial Services. Mercedes calls this an Agiity contract.
FLOWERBX began trading in April with a single, fridge-bodied Sprinter 313 CDI. Supplied by Surrey and Sussex Dealer Rossetts Commercials, the eye-catching vehicle is now hard at work on the capital’s roads from 7am until 7pm, five days a week.
FLOWERBX is an “online flower market” with a lean, efficient business model that allows it to supply flowers grown in The Netherlands, via its warehouse in West London, direct to homes and businesses at wholesale prices.
Customers can place ‘one-off’ orders or use the company’s on-line subscription service to control the frequency of deliveries. Crucially, FLOWERBX only deals in “single-varietal” bunches –“We are not florists and we don’t sell overpriced bouquets with unwanted filler flowers,” affirmed Adam, a former PR director for US fashion designer and film director Tom Ford.
FLOWERBX has already secured valuable publicity in magazines such as Vogue, Vanity Fair and The Sunday Times’ Style supplement, and provided flowers for a string of high-profile events, including a Michael Kors lunch and a Burberry fashion shoot with Mario Testino, as well as for the Tom Ford showroom.
Said Adam: “We have rapidly garnered a loyal customer base and if demand continues to increase in line with projections it won’t be long before we invest in additional vehicles.”
He continued: “The Sprinter has an outstanding reputation for reliability, as well as being comfortable to drive, fuel-efficient and equipped with a full complement of safety features.
“Above all else, though, it was the Mercedes-Benz image of quality and the clean lines that complement our fridge box, which attracted me to the Sprinter.”