There’s a lot more to buying a new car than choosing the make, model and colour. A little time spent doing some homework beforehand will likely lead to better long-term value. Whether buying for business or personal use there are many variables involved, so a clear picture of what you want to achieve and the options available to you will be invaluable.
In an upcoming series of articles, we’ll pull apart the vehicle buying process, evaluating options, highlighting potential pitfalls and give you the insight you need to ensure best value for your business or personal dollar. Here’s an overview…
The right finance
It might sound backward, but a good rule of thumb is to organise your finance before you go looking; it will improve your buying power. All lenders are not created equal and they won’t all be able to offer you the same options when it comes to finance. Car dealers, for example, will typically only offer HP, whereas a lease company is only likely to offer you a fully maintained lease on a brand new car, because this is where they make their mark.
The key is knowing what’s available before you get into the buying situation. Talk to your business banker, a finance company and a specialist broker, and understand which option is best suited to your business or private situation. With the right finance or lease package pre-approved, you can now go shopping with the strength to negotiate the best deal.
Lease versus Purchase
There are some myths surround leasing that need to be put to bed. Myth 1: Leasing only works for businesses. Myth 2: Leases are only available on new cars.
Business and personal buyers would be wise to examine both lease and purchase, and determine the true cost of their vehicle over the time they’ll have it. If you’re struggling to get your head around these figures and the mainstream finance houses aren’t helping, there are a number of specialist brokers in the market that will be able to. Consider how long you intend to own the vehicle and the likely usage – both of these areas will impact market depreciation and should be calculated into your monthly costs, helping you decide if lease or purchase works best for you.
Consider also how you want to account for the vehicle – purchases will appear on your balance sheet; leases won’t. And with several variations of leases on the market, it’s a good idea to press your finance company, broker or dealer for an option that fits your requirements, not theirs.
Buying a new car versus used
In current economic times, cashflow is paramount, and second hand vehicle purchases can be a way to improve this. Depreciation is a major differentiator between new and used cars. On a new vehicle purchase a better up-front price will attract less market depreciation so getting yourself into a powerful buying position is fundamental. With used car vehicle purchases, the depreciation curve tends to flatten out over time.
Buying a new car can be attractive because of a perception that only new cars are available for lease or attract manufacturers’ warranties. Not so… warranties can usually be applied to most used, ex-lease or ex-demo vehicles and are freely available from sources other than just the dealer network, even if buying privately. Likewise, leasing a second hand car is now becoming a well-recognised alternative to new, but many of the mainstream leasing companies don’t advertise this and you may need to look towards the 2nd-tier finance houses to provide this advantageous option.
Fuel cards and fleet management
A vehicle fleet can be managed either internally or externally. With a larger fleet this can take up a significant amount of time, in some cases requiring a dedicated full-time employee to administer. The alternative is external fleet management. A specialist provider controls and manages all the costs and administration of a vehicle fleet on behalf of their client. This usually attracts significant savings with cost controls over labour times, parts costs and actual work undertaken during service and administration of WOF, RUC and REG taken care of.
Then when it comes to your fuel card, shop around – there are different options available that offer more than just convenience. Beyond offering a good way to cashflow fuel expenses, some fuelcards will also offer a discount at the pump. Additionally, it’s not only fuel companies that can supply your card, many are facilitated by groups like your local Chamber of Commerce, each offering variations including fuel and affiliation discounts. Some research about which will be most beneficial to your business, will definitely be worthwhile.
Lance Manins is managing director of Driveline and a vehicle finance specialist. He regularly talks to business groups and advises on the best way to structure finance solutions for vehicle leasing and purchasing. For free independent advice contact him at firstname.lastname@example.org or mobile 021 650-659.