Ownership Ownership

There are several choices here. Some businesses with cash liquidity simply pay for every car as they need it, and buy outright. The car is treated as an ordinary business asset, and when sold, all the residual value goes back into the company's general funding pool.

For those who want to own the vehicles, but can't (or don't want) to pay outright, there are hire purchase arrangements. The client pays a deposit (typically 10 - 30%), followed by the regular, and fixed payments over the agreed contract period. If all the conditions are met, full title and ownership passes to the client once the final instalment is paid. This way each car or van is paid for over its working life.

Then, as with outright purchase, all the sales proceeds go back to the client on disposal. The regular payments can be reduced by building in an allowance for the projected residual value at the end of the agreement period. This lowers the payments, but of course there's no final pay-out on sale.

Different schemes allow for the future residual value to be set by the fleet operator (at their own risk of profit or loss, depending on the actual residual value); or by the supplier at their own risk. This provides a firm budget over the whole life of the vehicle, but might be set too conservatively to ensure a no-loss/ certain profit for the supplier (especially if it's a Volkswagen, given their strong residual value reputation).

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