Company cars are essential provisions for modern businesses, whatever the trade or industry. Executive staff require suitable vehicles for commuting and arriving to meetings with clients and partners looking presentable. Trade firms make heavy use of fleet vehicles to attend contracts and transport goods. Even smaller, growing businesses may need to supply company cars as a perk in hybrid working agreements, to enable seamless commutes.

But company cars are not always an affordable expense outright – illustrating the importance of understanding what financing possibilities there are for your business. Here are some of the most common, and their specific attributes.

Business Contract Hire

One of the more common methods utilised by businesses in financing a company car is the business contract hire option, or BCH for short. A BCH is effectively a long-term hiring agreement, in which a given vehicle is leased to a company for a pre-set period of time, and at a pre-agreed monthly cost. At the end of the hiring period, the vehicle is simply given back to the lease provider.

BCHs enable a business to acquire a company car without spending a significant amount of money upfront. They also enable businesses to maintain access to new vehicle models with each new lease – something which may be particularly important to executives or sales personnel.

Business Contract Purchase

A business contract purchase (or BCP), meanwhile, is a similar form of lease agreement that does not necessarily end in the return of the leased vehicle. Your business can instead choose to purchase the vehicle from the leasing company at the end of the lease, with a final balloon payment that tops up contributions to meet a pre-agreed ‘future market value’. The BCP can be useful for a company looking to expand its company fleet, without the initial cost burden.

Business Loan

Another common and popular route for business owners is to circumvent direct financing agreements with showrooms or suppliers entirely and seek external funding for the outright purchase of a company car. Approaching lending institutions for a loan enables your business to seek favourable terms for your lending.

It also enables you to avoid any additional costs arising from contracts that account for depreciating value. Getting a loan to buy a car is financially simple; you purchase outright and pay a lender back over time.

Lease Purchase

A lease purchase is another distinct form of financing agreement you can seek with a showroom or car leasing business. The lease purchase would see your business pay an upfront deposit for a company car, amounting to up to half its projected future value.

During the length of the financing agreement, you would pay small sums accounting for interest and the difference between retail and future value, with a final balloon payment securing ownership. This kind of agreement is particularly useful in rare occasions where a vehicle’s value appreciates as opposed to depreciates; this can be used to your business’s advantage in terms of investment and tax reduction.