“No deposit” still meant a four-figure payment on day one

Customer situation

A lifting contractor buying a used four-wheel-drive pickup, three years old at the time of purchase. £27,018 before VAT.

The challenge

Two things that both sound like obstacles and were not. The vehicle was used, and the business wanted the capital funded in full.

Age is not what funders are nervous about — uncertainty is. A mainstream 4x4 pickup has a deep used market and a well-understood value curve, so a lender can price what it will be worth at the end of a five-year term. Where used assets get difficult is when nobody can say what the thing will fetch in five years, which is a question about the market for that asset rather than about the year on the plate. Businesses that assume finance means buying new routinely pay more than they need to for the same work.

• Buy new instead — a considerably larger outlay for a vehicle doing identical work.
• Finance the VAT-inclusive cost — nothing at all to find on day one, at the cost of borrowing several thousand more and paying for it across five years.
• CW Asset Finance route — fund the ex-VAT cost in full and let the business handle the VAT in its own quarter.

What we did

The full £27,018 ex-VAT cost was financed over sixty months on fixed-rate hire purchase, with no capital deposit.

Here is the part worth reading twice. No deposit did not mean nothing to pay. The VAT was handled upfront, so a four-figure sum left the business on day one — all of it VAT, none of it deposit. A VAT-registered business will usually reclaim that on its next return, which makes it a timing cost rather than a real one, but it is still cash out before the vehicle has earned anything, and a quarter is a long time if the account is tight.

The alternative exists: finance the VAT-inclusive figure and genuinely pay nothing upfront. That means borrowing roughly the VAT amount more and paying for it over five years to solve a cash problem that for most businesses resolves itself in weeks. Both are defensible. Which is right depends entirely on the business’s cash position and its VAT quarter.

Key outcome

The whole ex-VAT cost funded over five years on a used vehicle, with the business going in knowing exactly what left the account on day one rather than discovering it at signing.

““No deposit” in an advert almost never means nothing to pay. Ask what the total figure leaving your account on day one is, and ask what financing the VAT instead would do to the monthly. If you only get one of those answers, you are being sold a product rather than advised on a structure.”

— Conor, CW Asset Finance

Every application is assessed on its own merits and all finance is subject to status and lender approval. This is one client’s outcome and is not a guide to what any other business will be offered.