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Buying vehicles: a guide for small construction companies

Looking to buy a new vehicle for your company?

For a small company in the construction industry, the decision on how to equip the company with the right number and type of vehicle is often a tricky one. Even owner managers who are experienced in buying their own vehicles, or perhaps have come from a large business with a well-developed fleet policy will have to adjust their thinking.

There are some key questions to consider: what kind of vehicles do you need as a business? How do you want to finance the purchase? How many do you need? How important is make, model, age? And, of course, how can you get the best price?

A recent report found that for the majority of SMEs, the day-to-day challenge of keeping vehicles on the road tends to dominate their thinking when choosing cars and vans. However, it also found that some less obvious factors came into play with certain sectors.

Here are some key dos and don’ts to get the best vehicle for your business, and at the best price.

1. Think differently

Buying a vehicle doesn’t always have to involve using the usual channels. “According to our findings, the death of the traditional sales funnel is imminent,” says Mark Sutcliffe, who edited a report on the SME vehicle market for Sewells. “The explosion of digital channels has enabled marketeers to bombard potential customers with sales incentives and special offers, yet conversion rates are in freefall as most of this marketing material ends up, unread, in the recycling bin.”

Indeed, there are a growing number of unexpected places where small businesses can find bargains. Some dealers are now selling ex-lease vehicles, trucks, vans, cars, construction equipment and machinery, via a tailored LinkedIn page aimed at SMEs and other prospective buyers.

In Europe, Amazon continues to follow its strategy of disrupting existing sectors by entering the company car space. Last November, it began acting as a portal for Fiat Chrysler in Italy, presenting the 500, 500L and Panda models online.

The arrangement remains a test phase for both parties, and has been extended until the end of 2017. The company has a similar plan operating in France with Seat.

According to the FT, Amazon intends to expand the scheme into another major European market, possibly the UK, from 2018.

2. Timing is everything

Knowing the seasonal movements of the market can be a big help to a business looking to buy a vehicle. That is especially true of those in the agricultural and construction sectors.

For cars, many dealerships discount their vehicles strongly during these months in order to improve sales figures, and to clear the way for models arriving in the new year. So, a few rules of thumb for getting your timing right:

  • Buy an old model when the new one goes on sale

Buying the previous generation model can be a great way of reducing your costs. A new launch will see the previous version drop in price, while many dealers will be more likely to offer good deals in order to free up room for the new models.

  • Purchasing an existing registration plate as the new plate launches

Buying ‘pre-reg’ is a well-worn tactic of the savvy car buyer. If the new plate isn’t important to the purchase, previous-plate cars are likely to be discounted as the new ones arrive. In addition, dealers often find themselves with a surplus of new stock, which can provide the buyer with the leverage to get a good deal.

3. Check your tax status

Vans are classified as plant and machinery for tax purposes and qualify for 100% allowances under the Annual Investment Allowance (AIA), which carries a deduction of 100% of the cost to reduce a company’s taxable profits.

The assessable van benefit, if the vehicle is regularly in private use, is £3,230 in 2017/18 (£3,150 in 2016/17) and the relevant fuel benefit is £610 in 2017/18 (£594 in 2016/17).

The benefit exemption for zero emission vans has now been phased out and represents 20% of the van benefit charge for 2017/18 and 2016/17. Where there is an ‘insignificant’ level of private use, HMRC acknowledges that there is no benefit arising and these amounts do not apply.

Insignificant private use would be classed as, for example, stopping into the GP for an appointment during a routine day. However, using a van to do the weekly shop would not qualify. If there is an insignificant level of private use, there can be substantial tax benefits in utilising a company van compared to a vehicle with high CO2 emissions.

4. Beware conversions

Neil McIntee knows a thing or two about buying vans. As an experience motoring journalist, and founder and editor in chief of VansA2Z, he’s ideally placed to advise small business owners on the type of commercial vehicle they should be looking for.

First, beware of converted vans. “There are some very specialist conversions out there but if you’re just looking for a jobbing van, stay away from conversions, because they’ve been messed about with,” he says.

4. One size doesn’t fit all

“It might sound obvious, but this is so important, and you’d be surprised how many people go wrong,” says McIntee “If it’s too small, its useless; if it’s too big you’re just wasting fuel. It has to be fit to purpose.

McIntee says an attendant issue is the future of diesel. “All vans are diesel, partly because petrol vans simply don’t work,” he says. “A good diesel van, well maintained, can be cleaner than the average car, depending on the measure you use.”

McIntee also points out that the long-term trend in certain vehicle categories is towards hybrids. “There is a case to be made for an all-electric commercial vehicle. For instance, if you’re in a city, especially London, with the Congestion Charge you can pretty quickly get your money back.”

5. Consider leasing

Despite the huge increase in the popularity of vehicle leasing, there remains a perception that it is the high-cost option. Indeed, a recent survey revealed that 43% of business decision makers still believe leasing is too expensive. Meanwhile, only 8% think it’s easier to own a vehicle whilst 6% believe leasing doesn’t provide the right type or quality of vehicles.

And there’s no doubt that it is surprising to see that such a high percentage of decision makers believe leasing is both too expensive and too time consuming for their business. In fact the opposite is often true. And when you consider that the average new car will lose 20% of its value in each of its first three years of use due to depreciation, avoiding owning a depreciating asset looks more attractive.

And getting the leasing arrangement in place before you start to look for a vehicle means that you are better placed to pounce on any special deals, should they arise.

Sector Trends
Manufacturing and automotive
Construction

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