Asset Backed Finance for Private Cars: Is It the Right Choice for You?

asset backed finance

What’s one of the coolest cars from 2021?

The Porsche Taycan 4 Cross Turismo. With a selling price starting at just above $90,000, the new Taycan provides an intense driving experience.

Can you imagine how impressed your clients would be if you drove up in a brand new Porsche? Whether you’re thinking about getting a luxury vehicle, or something more practical, a new car can help take your company to the next level.

However, having the funds to buy these expensive models outright can be nearly impossible. That’s why you should explore what asset backed finance has to offer.

How could an asset financing plan help you get the private car of your dreams? Read on to find out.

What Is Asset Backed Finance?

What exactly is asset backed finance? For starters, it’ll help if you understand what an asset is. 

An asset is something that your company owns that has value. Anything from your company’s laptops, all the way to the pieces of equipment that you use would qualify as assets.

Soft assets are non-movable items, such as hardware or software packages. Whereas, hard assets are going to be high-value items, that are movable.

Hard assets are sellable, durable, and attractive to lenders. Examples of hard assets include cars, equipment, and even real estate.

What Type of Assets Do You Need?

If your company has the correct type of hard assets, you could qualify for asset financing. Asset financing is a type of loan you’ll take out to pay for a new asset. In this case, you would be taking out a loan to buy a private car or a company vehicle.

It’s common for companies to look into asset financing when they’re ready to grow but don’t have enough available cash on hand. By accessing those vital assets sooner rather than later, they can help beat out their competition!

However, one thing to keep in mind is that asset financing is designed for companies. Suppose you’re simply looking to buy a car for private use, and it won’t be helping your company. In that case, it’s not going to qualify for asset financing.

If you’re looking for a car just for private use, you need to explore a secured loan through a bank. But, if your vehicle is going to be for personal use and company use, it could still qualify for an asset finance plan.

How the Financing Process Works

Let’s say you have your eye on a brand new car. You know that this vehicle would help take your company to the next level, but you don’t have enough capital on hand to buy it out front. Or, perhaps you do have enough capital, but you don’t want to put it all into one area.

You could reach out to us for a car quote. We’ll be able to assess your company’s current financial standing and determine whether or not you qualify for a loan. We’ll also be able to help point you in the right direction so that you get the correct type of asset agreement.

Different Types of Finance Agreements

Unlike a secured or unsecured loan, there’s a lot of variables that go into asset financing. Instead of just getting a straightforward loan, you’ll be able to customize your plan so that it perfectly meets your needs.

For instance, you could look into getting a contract for hire asset finance. Hire finance plans are usually called car asset finance plans since they work great for company vehicles.

We’ll buy the car you need, and you pay us back through instalments. The length of the instalments will depend on your leasing term. It’ll be our responsibility to maintain and service the vehicle for a contract hire arrangement.

At the end of the leasing period, you won’t have ownership of the car. Instead, at the end of the leasing period, what happens with the vehicle will be up to us.

Another option is to move forward with finance leasing or a capital lease term. Finance leasing is a long-term plan, and it’ll last for the vehicle’s lifetime.

You’ll get to use the car as much as you need to and pay it off through instalments. You’ll be responsible for paying for the car’s insurance and maintenance for finance leasing plans.

When we sell the car at the end of your term, you might get to share in a percentage of the share value. However, you’re not going to have the option to buy the car outright.

Top Advantages of Asset Financing

One of the most significant advantages of asset-backed financing is having a low upfront cost for a high ticket item. Since the payments are fixed, it’ll be easy for your company to develop a long-term budget plan.

Depending on the type of financing plan you qualify for, you could forgo paying for the car’s servicing and maintenance. Another advantage is that you won’t take the same risk of depreciation as you would if you bought the vehicle outright.

Instead, your company can focus on spending the money in a way that’ll help you thrive. If you don’t know how depreciation works, it’s worth your time to check out a depreciation calculator (it’s free to use). It’s astonishing how much value a car loses when you buy it outright.

Are There Any Downsides to Asset Finance?

How can you be sure that asset backed finance is the right choice for you? The answer depends on the state of your company. If your company is doing well and you have enough hard assets, then asset finance can be a wise choice.

You’ll be able to pay your way to success while leaving the competition in the dust. However, you will be paying for an item that you may never own.

As long as you’re comfortable with the leasing agreement for the car, then not owning it shouldn’t be a problem. Another thing to consider is that asset financing is a long-term solution.

Most finance providers aren’t going to agree to any term that lasts less than a year. Overall, asset financing can mean that you pay more for the item than if you were to buy it outright.

However, many companies don’t have the working capital on hand to buy a new car outright. Being able to play in the big leagues means exploring all of your financial options.

Spending Power Through Savvy Car Financing

Now you know the ins and outs of the asset backed finance process for car financing. By understanding how the new car will help your company thrive and what hard assets will help back it, you’ll be able to determine if you’re going in the right direction.

Here at Parkins Finance, we want to help your business evolve. You can jumpstart the process by requesting a free car finance quote. That way you can finally see what you qualify for!

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