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Finance: get the right deal for your business

As with any other capital outlay, the way you finance your forklift truck purchases deserves special consideration.

What's the difference between contract hire, hire purchase and finance lease? Weigh up the options with our easy-to-follow guide.

Contract hire

Although you won't end up owning the truck if you opt for a contract hire arrangement, there are several reasons why this may be the right option for you:st_0805_5_main_inline_1.jpg

  • Because contracts are for specific terms, you know exactly what you have to pay and when - meaning you can plan ahead and control your costs.
  • You receive a complete package including delivery, maintenance, service and repairs. This translates to less worry and less expense ongoing.
  • When it comes to balancing the books, outstanding rentals are not shown as liabilities on your balance sheet, so will have no impact on your debt-to-equity ratio.
  • It's tax efficient - all the rental you pay can be offset against tax.

Hire purchase

With hire purchase, you own the truck at the end of the agreed term, at which point you can either continue to use it or sell it on. And there are other advantages, too:

  • The fixed term contract again means you know what you have to pay and when, so you can plan ahead and control costs.
  • The deposit is negotiable, allowing you to reduce what you pay up front - and freeing up capital for other parts of your business.
  • You can claim tax allowances against the hire purchase.

Finance lease

With a finance lease, you keep responsibility for the maintenance, repair and service of your vehicle, as well as insurance costs. That needs to be weighed up against other factors - particularly flexibility - that go in its favour:

  • At the end of the lease term, you can either continue using the truck (for which you pay a nominal lease), or sell it on and receive most of the sales proceeds - in the form of either a rebate or a deposit on your next purchase.
  • All the rental you pay is allowable against tax, so again, this option is tax efficient.

Our conclusion?

The first step to discovering the right deal out there is to ask questions. A reputable forklift dealer will discuss your business’ financial goals and take you through the range of options available. Working together you’ll find the solution that suits you - and your budget.

  • Action points
  • Phone forklift dealer to discuss latest deals
  • Discuss tax implications with accounts department
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