Published article about fleet management

If you like the idea of owning your vehicles, don’t mind putting them on your balance sheet, like to be flexible about when you sell them and don’t mind tying up working capital, then buying your own cars might be right for you.

The downside is that you will be fully exposed to movements in the used vehicle market when selling them. In other words, you take the residual value (RV) risk.

But bear in mind you won’t get the same levels of dealer discounts and manufacturer bonuses that leasing companies can attract.

Hire purchase (HP) allows you to become the owner at the end of the agreement, normally by paying a nominal amount.

It gives you the risks and rewards of ownership from the date of delivery (including RV risk) so the vehicle and the balance due to the funder must be shown on your balance sheet.

Lease purchase is similar to HP but a lump sum (‘balloon’) instalment is payable at the end of the contract. If it has been estimated accurately, the sale proceeds will cover the balloon payment.

Contract purchase combines a lease purchase or conditional sale agreement (containing a balloon payment), a repurchase undertaking and a maintenance agreement.

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