The imminent arrival of the new 67 plates in September is, as always, getting people excited about picking up that new vehicle.
For private buyers, the processes and sometimes pitfalls are well-known. However, if you’re a relatively new business, you may not be so au fait with the realities of life.
While buying a new commercial vehicle (for simplicity’s sake, here we’ll call any vehicle being purchased for business reasons “commercial”) then you should be prepared to enjoy yourself. Yes, take it seriously because it’s a lot of money but concentrate on the positives!
Even so, there are a few things you need to be aware of and prepare for, in advance.
If you’re a new small business, then there’s a fair chance you’ll be operating as a partnership, sole trader or perhaps micro-enterprise Ltd company.
Typically what that means is:
- for some lenders, perhaps like the banks, you’ll have little commercial history and that will make them uneasy about lending. From their viewpoint, your business will be largely invisible and off the radar;
- with no trading history, some lenders will look more closely at your own personal credit score. A few issues will by no means be a showstopper but some lenders or finance providers may be more understanding than others;
- remember that while the vehicle provider may have finance options on the table, this can make things very complicated for you in terms of driving a hard bargain on the vehicle’s price or trying to be hard-nosed when reviewing your finance interest rates etc.
It’s perhaps understandable if a business wants to get started ASAP with their commercial vehicles rather than spend time sit around examining funding models and associated costs. Try to resist that temptation though and make sure you’ve adopted a hard-headed approach, with expert advice, before rushing off to the vehicle showrooms.
The UK has one of the higher proportions of company car ownership (or use) in Europe. However, take the advice of your accountant before deciding how to deal with commercial vehicles officially described as “company cars”.
There are some technical issues here relating to things such as depreciation and accounting entries and they will be decided, in part, by how you’re paying for the vehicle. It’s easy to get this wrong so be sure to take advice before making your decision as to how to purchase your vehicle.
In passing, also look closely at the idea of “fully expensed” cars in accounting terms. At one time, there were very major taxation advantages to operating on that basis but these have been eroded to such an extent by HMRC that many accountants will argue today that there is no longer any point in trying to include private mileage etc.
Think about who will drive it or them
It’s perhaps stating the obvious but don’t forget that if any of your co-workers who will be driving the vehicle has motoring convictions or is young or inexperienced then your insurance premiums may soar.
In some cases, it might be more cost-effective for you to pay their expenses for using their own vehicle on their insurance but remember to ensure they have changed their cover to commercial use. You may need to reimburse them accordingly and agree an equitable mileage rate.
Take accounting advice here too.