Whether you’re starting a new bus and coach business or expanding an already existing one, it’s likely that you’ll be in need of assistance with bus and coach finance.
The basics
In many respects, trying to find bus and coach finance isn’t that different to looking for private car finance. You’ll need to find someone who is willing to either lend you the money or who will purchase the vehicle and then allow you to use it over time.
If someone has lent you the money, they’ll typically expect to have a legal charge over the vehicle which means they can seize it if you don’t maintain the loan repayments. If they have purchased it, they’ll typically allow you to use it as the registered keeper while they will remain the owners – until such time as you have made the final repayment.
A slight variation on that second option is where you’re not actually paying off the cost of the vehicle, working towards an end point where it becomes automatically yours. In those variations, you’ll actually be leasing the vehicle back from the owners for a specified period. At the end of the lease you may or may not have an option to purchase the vehicle.
The nomenclature
These different forms of bus or coach financing have specific names:
- buying outright with a loan – typically this is a bank or other loan type usually known as “secured lending”;
- buying the vehicle in agreed instalments while operating as its registered keeper – this is the familiar “Hire Purchase” (HP);
- using the vehicle under an agreed arrangement with its owner – typically called “Operational Leasing” or “Finance Leasing”.
The pros and cons
Before giving a quick overview of each option, it’s worth noting that what’s best for someone else might not be for you. A lot will depend upon the exact situation of your company and its accounting position. What follows is very general and you should not hesitate to seek the advice of your accountant and a specialist in bus and coach finance before deciding how to go forward:
- Bus and coach loans
These have the advantage of being conceptually easy to grasp in terms of how they work. The downsides are that lenders can be slow to make a decision, they’re sometimes risk-averse and you may need an excellent business standing to be approved;
- Hire Purchase finance
Again, an arrangement that is very easy to understand and widely familiar. A big plus is that at the end of the agreed repayment period, the vehicle is yours.
Point to remember – you are committed from the outset to the purchase of the vehicle concerned. Changing your mind half-way through might be possible but this sort of scheme is not designed for such;
- Leasing finance
The two forms of leasing may be very tax or balance-sheet advantageous and they do mean you’re not committed to purchasing the vehicle concerned. The differences between the two forms of leasing largely affect the way the deal is reflected in your accounts and you may need an accountant’s help to decide which is preferable for you.
If there’s a downside, it perhaps only affects those businesses who want to see an asset at the end of all their payments. However, even that can be achieved with leasing which provides a purchase option at completion.
Summary
A very large difference between car or bus and coach financing is, of course, the typical cost involved.
You’ll be using substantial sums of your business’s money and therefore it’s important to be sure you’re making a decision on finance that’s suitable for you.
Getting that specialist advice on options may be a good idea before you start looking at specific vehicles.
