Asset Finance for Cars: What Should You Expect

asset finance

Expansion through products; that’s the Unilever way.

Growing from a soap manufacturer into a giant multinational company, Unilever has a solid global presence. By specializing in the products that people need, they dominate large and small markets worldwide. After being in business for 9 decades, it’s clear that Unilever’s success comes from purpose-driven brands.

In the beginning, the company probably took advantage of asset finance to get new delivery trucks. Otherwise, beating out the competition would be nearly impossible!

If you’re looking to help your company grow beyond your wildest dreams, you need spending power. Asset-backed financing can help you have all the power you need, and then some.

What exactly is asset financing, and how does it work for cars? Read on to find out.

Understanding Asset Finance for Cars

What exactly is asset finance and how does car finance work? It’s the process of borrowing money to purchase a new asset for your company. It’s a safe way of getting working capital, so your business can grow.

You’ll be able to use the assets your company already has to take out a loan. The loan you take out will go against the items you already own. One of the most significant benefits of using asset financing is that you’ll be able to get the things your company needs, when you need them.

Using Asset Finance to Buy a New Company Car

A great example of asset financing would be the ability to leverage assets your company has to help you get a loan for a new car. For instance, let’s say your company owns an expensive piece of equipment.

You could leverage that equipment to help you get the car loan you need. You won’t give up ownership of the asset you use to help finance your new loan.

Instead, your equipment will become a type of collateral so that lenders can give you the money you need. Considering the cost of buying a new car in the UK has gone up 5 times, financing makes a lot of sense!

How Does Car Finance Work With Assets?

Let’s talk about how we determine car finance eligibility. It all starts by assessing your company’s current financial standing.

Did you know that you can break assets down into 2 main groups? There are hard assets and soft assets.

Anything your company owns that doesn’t have a significant resale value would be considered a soft asset. For instance, if your company recently invested money in a new alarm system, it would be challenging to turn around and sell that alarm system for a profit. While the alarm system is still an asset, it’s a soft one rather than a hard one.

A hard asset is something that’s going to have a great resale value. Cars, machinery, and expensive equipment are all examples of hard assets. It would be straightforward to take these items to the market and sell them for a quick profit.

Your company will need to have hard assets to qualify for asset financing. If you only have soft assets, it will not give you the correct type of lending power. Our finance company can help you determine what assets are movable, durable, identifiable, and sellable.

The Best Way to Purchase a New Car Through Your Business

Let’s say you decide to move forward with an asset agreement for your vehicle financing. The first thing that will happen is an assessment of your company’s current standing.

An experienced financial broker will assess your company’s existing securities and assets to understand what type of funding you qualify for. The broker will also help you decide what agreements and terms best suit your company.

For instance, you might look into doing a hire purchase, finance lease, invoice financing, or an operating lease. You don’t have to know upfront what type of financing your company needs; our financial brokers will be able to take care of that for you.

After finding out what you’re looking for and understanding your company’s financial standing, brokers will be able to point you in the right direction. Some asset financing options will lead to full ownership of the loan. This can be perfect for a company looking to spread out its investment.

Other agreements are going to let you have temporary responsibility for the asset. Having temporary duty is an excellent option if you’re looking for a short-term agreement. Again, if you’re not sure which choice is right for you, let one of our expert brokers help.

Exploring Asset Finance Options for Cars

Even though you don’t need to know what type of financing option your company needs, it’ll help if you understand how they operate. Let’s start with hire purchase.

Hire purchase means you will buy an asset and spread the cost out over an agreed-upon term. The item will show up on your balance sheet, and it’ll also be your responsibility to insure it.

A hire purchase agreements mean that the item’s insurance, maintenance, and security are entirely left to you. This type of agreement is referred to as vehicle asset finance.

We find that a hire agreement is a perfect way to go if you’re looking to get a brand new company car. We would buy the car your company needs, and you would pay us back using instalments. You’ll pay the instalments over an agreed-upon leasing term. 

The leasing term will be a long-term one, so you’ll have plenty of time. Once the leasing period is over, we also choose what happens to the vehicle. However, you can pay a fee to secure ownership of the car.

There are also finance leasing options. You can also refer to finance leasing as a capital lease. It’s a long-term lease that works for the entire lifetime of the asset.

You’ll get to use the asset and pay it off slowly, with a large initial downpayment. You’ll be responsible for the car’s insurance and maintenance for finance leasing options. The payments will end once we’ve recouped a certain amount of the asset’s purchase value. 

You might be able to share a percentage of the car’s share value after the item is sold. However, you won’t have the option to buy the vehicle outright with the finance leasing option.

What Asset Finance Does Your Company Need?

Why is it that you want to get a car for your company? Is it because the new vehicle would help your business operate more efficiently? This would be a great reason to move forward with asset financing.

Another reason to consider asset financing is if you’re looking to grow your company but need help overcoming current production standards. Perhaps you’re new to the market or simply in a competitive industry. If having a recent model vehicle will help you beat out the competition, then it can be a wise financial decision in the long run.

Another thing to consider is the image you’ll have on the public side. Suppose your company is currently using old or outdated cars. In that case, this can give customers the impression that your business isn’t doing well. Since people don’t want to invest in companies that aren’t thriving, a bad public image can be a real problem.

Upgrading to stylish new cars, with better efficiency, will help send the right message. The new car or fleet of vehicles will let customers know that you’re serious about making money.

Car Finance Calculator for ROI

Before starting an asset agreement, you’ll want to calculate your return on investment or ROI. Why do you need to use a car loan calculator? You need to be able to make a strong case for every asset you’re purchasing.

Lenders and investors will want to see how this asset will help your company grow. You’ll also be putting yourself in a better position if you understand your potential return on the loan you’re taking out.

Will a new vehicle add to your business’s bottom line? Or could you benefit from a used car that still looks great? These are the questions you’ll need to be asking to make the best financial decision.

Don’t just use any car finance calculator though. Our website features a car finance calculator UK version, so you can be sure you’re getting the right numbers.

Car Finance Check for New vs Used Car Assets

What stage is your company in? Is it still in its infancy within your first few years as a startup? Or is your business a full-fledged adult, ready to take on more responsibilities?

If your company is relatively new, every dollar can make or break your business. Instead of going with brand new assets, consider getting used ones. On the other hand, if you know a brand new car will give your company the efficiency and productivity it needs, double-check that you can afford it.

 

How much money can you get if you finance an asset? It’ll depend on the asset’s value that you’re putting up for collateral. Some lenders will be happy to start a lease for as little as $1,000; other opportunities could yield millions.

Before receiving approval for any amount of money, though, the lender will double-check that you have the minimum amount of annual turnover necessary.

For instance, what is your company’s cash flow look like? Your yearly cash flow statement will be a significant determining factor in whether or not you’re approved for financing.

Calculating Your Company’s Cash Flow

Do you know how to create a cash flow statement for your company? It’s not as difficult as it sounds.

A cash flow statement is simply an itemized list of your cash-based financial transactions for a certain amount of time. Your cash flow statement doesn’t only help you secure financing. It helps you make wise spending choices, all year long.

For instance, knowing your cash flow can also help you set a realistic budget. Luckily, there are a lot of free online tools to help you calculate your company’s monthly, and annual budget.

Overall, a cash flow statement is a great way to establish the financial stability of your company. If you prepare it the right way, you’ll be able to show whether your business has made or lost money throughout the year. You’ll also be able to offer any money that you’ve lent or borrowed.

Any type of debt your company has, even if it’s been repaid, will also go in the cash flow statement. You can break up your cash flow statement into different categories.

The categories include investing activities, operating activities, and financing activities. If you need help coming up with a cash flow statement for your company, you can reach out to one of our brokers for advice. They’ll be able to walk you through the ins and outs of each category so that you can create an accurate cash flow statement.

Does the UK Regulate Asset-Backed Car Financing?

Does the UK regulate asset finance? Yes, all asset-backed finance agreements undergo regulation.

The agreements have to abide by the standards of lending practice. The rules are in place to help protect you as a lender.

If you’re wondering whether or not your company is eligible, it will depend on your financial abilities. If you have enough equity in the correct type of assets, you’ll be able to prove that your company can handle a car finance situation.

Is Car Repossession a Possibility?

Can the lender repossess your vehicle in an asset-backed finance agreement? Yes, you’ll have to abide by the car repossession laws in the UK. Like any type of secured loan that uses collateral, you’ll agree to a specific set of terms.

If you fail to meet the terms, then repossession is possible. For instance, if you default on the loan, you could lose the vehicle. Another example where repossession could occur would be if it was your responsibility to insure the car, but you don’t.

The only reason we’re going to repossess an asset is if we deem it’s necessary to recoup our funds. However, repossession is always a last resort.

We always work with our customers to find out how we can help them succeed. When you do well, it reflects well on us!

Is Car Asset Financing Right for Your Company?

Depending on your company’s financial standing, asset finance could be a perfect choice. It can be a favourable alternative to taking out a bank loan, too, thanks to our fast approval process. After all, business is a 24/7 competition, and every moment you’re not progressing, you’re falling behind.

We know that this is a big decision for your company, but we will be with you every step of the way. Here at Parkins Finance, we’re ready to help you get ahead.  Use our online car finance calculator to find out what you qualify for today!

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