Business contract hire – deal after no deal

07:10 08 March 2014

Business contract hire – not getting the right decision? Simon Gray explains more.

At Credo we are seeing more proposals for car and van finance where manufacturers have failed to approve deals, especially for contract hire.

Effectively an extended rental agreement, you tend to pay a small deposit, three monthly payments is the norm, and then pay depreciation and interest down to a pre-determined future value. This value is not disclosed to the hirer but is normally about 90% of projected trade price. Contract hire can be a really cash-effective way of financing vehicles, with real savings.

The issue for underwriters of manufacturers’ finance is they see exposure to risk all throughout the agreement – that initial big dip in value driving out of the showroom (not covered by the small deposit) and they are secure in the deal only when the vehicle is returned – and hope to make a residual profit. Because of this perceived exposure they underwrite very harshly. If a company is relatively newly formed, maybe lost money, has a negative balance sheet or any detrimental search data recorded against it, finance will be declined in most cases.

Even good companies lose money, have intangible assets or are newly formed. Detrimental information may relate to a dispute not taken into account, but the manufacturer lenders don’t, or won’t, make these allowances.

Finance brokers, like Credo Asset Finance, may help when manufacturer finance companies decline. Maybe not with the exact contract hire deal but certainly something equally as competitive where a more manual and pragmatic approach to underwriting means people who understand business and business finance will look at the deals. Finance leases give the same VAT efficiency, deposit levels etc with the added benefit of some residual profit and are an alternative method of finance.

If a manufacturer finance rejects an application, don’t think that’s it for you or your business when renewing vehicles. Independent brokers’ expertise and contacts can get the deal in front of someone who understands business and business finance in particular.

Credo Asset Finance, is at 85 Yarmouth Road, Norwich, NR7 0HF. Telephone 01603 703180, email or visit the website at


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Andy Russell

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EDP motoring editor, journalist who loves wheels and engines but hates cleaning them.

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