Funding Information For School Minibus Leasing
What choices do I have?
From the outset, it is imperative that you understand the different finance methods in order to make the correct decision. In theory, you can operate a minibus through any one of the methods noted below:
- Contract Hire – a form of lease based on fixed monthly rentals paid over a predetermined term (2, 3, 4 or 5 years). Optional servicing, maintenance, and safety inspection contract can be included so that you cover the cost of fuel or insurance only. Road fund licence included for duration of term. Vehicle is returned at the cessation of contract;
- Finance Lease – form of purchase product, whereby customer pays monthly over predetermined term (2, 3, 4 or 5 years). Characteristically, a balloon payment will need to be paid (by cash or further finance) in order to allow full ownership. Responsibility for servicing and maintenance with customer. Road fund licence included for 1st year only. Disposal subject to terms of finance company until balloon is satisfied;
- Hire purchase – form of purchase product, whereby customer pays monthly until finance is repaid Responsibility for servicing and maintenance with customer. Road fund licence included for 1st year only. Disposal subject to terms of finance company ; or
- Outright Purchase – cash purchase to enable full ownership of vehicle. Responsibility for servicing and maintenance with customer. Road fund licence included for 1st year only. Vehicle can be disposed of at anytime but will be subject to depreciation and market forces.
As leasing is a generic term, it is really important that distinctions are made between ownership/purchase style based products and usership/hire style products.
What are the differences between a finance and operating lease
Peter Hill, from the law firm Geldards LLP, has provided a useful guidance note on how to distinguish between different methods of finance. While we have provided a brief synopsis of his article, if you follow the link below to Education Business, this will give you the full piece.
Equipment leasing is a form of asset finance, the other most common form being hire purchase. It is as increasingly important method of financing capital‑intensive equipment. An equipment lease is an agreement to hire, but not to buy outright, an item of equipment. If the lease agreement contains an optional clause providing the hirer with a right to purchase the equipment at the end of the term, it is a hire purchase agreement.
Please click the Education Business title for more funding information for school minibus leasing.
What Should I Choose?
As discussed above, deciding upon the right financial method should ultimately be based on understanding the options available to you. To assist with this, please review our quick guide to leasing v buying a minibus:
|Consideration||Contract Hire||Finance Lease||HirePurchase||Outright Purchase|
|Ownership of Vehicle||N||Y(1)||Y(1)||Y|
|Inclusion of a Comprehensive Maintenance/Servicing Contract||Y||N||N||N|
|Inclusion of Road Fund Licence||Y||Y (2)||Y (2)||Y (2)|
|Breakdown Cover||Y||Y (3)||Y (3)||Y (3)|
|Regular Safety Inspections||Y||N||N||N|
|No Depreciation Risks||Y||N||N||N|
|No Vehicle Disposal Concerns||Y||N||N||N|
(1) Ownership of vehicle is subject to decision of customer and finance company a the cessation of the contract
(2) RFL provided for first year only
(3) Subject to the manufacturer. No assistance provided under the terms of the contract
Our main funding product is almost certainly contract hire, as it offers a fixed cost solution and removes many of the evident risks which arise with operating a minibus. While some other consideration do still apply, such as driver training, D1 licence or conversions, no finance product can encompass everything. However, that is why the team are on hand here to fill any gaps.