Car / Utility Truck Credit
The utility is the vehicle of choice for businesses. It can take the form of a van or van, and is most often used to transport goods. It is therefore most often essential for business leaders.
Nevertheless, there is the question of financing this utility. What financing options are available for this type of vehicle? As for individuals, the company has three options to finance its utility. It can first finance it in equity.
She can then take out a credit. Finally, the company can enter into a rental agreement. We will see, however, that there are specificities in financing dedicated to companies.
The financing of its utility in own funds
The company can decide to finance its commercial vehicle with its own funds that is to say by drawing directly into its cash. This means of financing has the advantage of making the company directly owner of its vehicle. The ownership of the vehicle allows her to separate from it when she no longer needs it. This method also allows him to save interest on a loan or the additional financial cost of renting the vehicle.
If this method of financing allows the company to make no commitment on its behalf, this implies a cash outflow that can be significant. Equity financing is therefore not suitable for all companies. It assumes to have enough cash to cover the utility’s financing.
The financing of its utility thanks to a loan
If you do not want to finance your utility in equity or that your cash does not allow you, you can resort to a loan.
This means of financing also has the advantage of immediately making you the owner of your commercial vehicle. The cash flow of your company is not affected in the short term because the financing of the vehicle is covered by the loan.
Nevertheless, in the long term, the interest due by the company in respect of the credit entails an additional cost for the cash. Similarly, the use of credit increases the debt ratio of the company. This may limit the use of other credits.
The financing of a company vehicle thanks to a credit has the particularity of bearing on the selling price HT. This does not exempt your company from paying a 20% VAT when you purchase the utility. Nevertheless, the repayment by the company of monthly payments of the credit is exempt from VAT.
The conclusion of a lease
The last solution offered to a company to finance its commercial vehicle is to resort to renting. There are different rental contracts.
This may be a Long Term Rental (LLD). The company rents its vehicle for an agreed period. She is not the owner and at the end of the contract she will have to return the utility vehicle. If the company still needs a vehicle, it can conclude a new LDD.
Although the purchase price of the vehicle is TTC, the LDD allows the monthly recovery of VAT on rents.
The entrepreneur can also conclude a Lease with Purchase Option (LOA), it is also called leasing.
The process is the same as for the LDD. The vehicle is rented for a specified duration and amount. The difference lies in the fact that at the end of the contract you can buy back the vehicle for the price agreed in the contract. If you do not want to buy the vehicle, you can complete a new lease to obtain a newer utility.
Leasing or LOA allows you to recover VAT on the monthly payment of rents. Leasing also has the advantage of spreading the purchase cost of the utility over several years. However the first rent is often increased which is an additional cost for the company.
Whether you lease or rent your utility, you do not own it during the contract period. If during the contract you no longer need the vehicle, you will not be able to separate from it and will have to continue the execution of the contract until its end.