Finance For The Logistics And Haulage Industry

The wheels of the logistics and haulage industry keep the motors of the UK economy turning. 89% of all goods transported by land in this country are carried by road and even the remaining 11% gets to shipping ports, rail heads or airports by road freight, according to statistics produced by the Road Haulage Association (RHA).

There are nearly half a million heavy goods vehicles (HGVs) over 3.5 tonnes already registered in the UK and the industry as a whole employs around 2.5 million people.

Despite the logistics and haulage industry being highly competitive, the profit margins are low, inflationary pressures in the domestic economy add to the commercial challenges and Brexit has cast a degree of uncertainty and concern over the operations of many companies involved in the industry.

Nevertheless, industry analysts expect 2018 to have been a generally successful year for the industry as a whole, says the Freight Transport Association (FTA) in its annual Logistics Report.

According to the FTA, concerns about the nature and scope of Britain’s trading relationships with Europe post-Brexit, may have some impact. In an industry which relies on EU workers, an estimated 35% of FTA members are also worried about recruitment at a time when freedom of movement is significantly restricted.

But the greater worry is the effect that domestic inflation may have on investment. Apparently, some 14% of its members have delayed investing in essential haulage vehicles as consumer spending faces a decline.

Invest in your industry

Instead of holding back on essential investment and seeing your heavy goods vehicles age, deliver ever less reliable performance and cost you more to run, you might choose to stay ahead of the game and gain an edge on the competition by making the investments you need.

Here at ACF Direct we offer a number of logistics and haulage finance options that allow you to choose the funding method to suit you and your business.

Hire purchase

You might want to go down the route that many another successful business before you has been and opt for buying new rolling stock under a hire purchase agreement.

After putting down an initial deposit—of typically around 10% of the purchase price—you then make equal monthly repayments on your chosen HGV or other vehicles. By the end of the agreement, with the final instalment paid, you take full ownership of valuable new rolling stock.

From the start of the hire purchase agreement, your acquisition is capitalised for your business, with the asset appearing on your balance sheet.

Finance lease

If you do not aim to own the vehicle but want continuous, exclusive use of it, an alternative is to enter a finance lease.

A finance lease typically extends for the whole of the useful working life of the HGV, during which time you are renting rather than buying.

At the end of the lease you are usually presented with two main options:

  1. Agree to pay a token “peppercorn rent” to continue using the vehicle—usually amounting to no more than an annual payment of what you had paid each month.
  2. Sell the vehicle on behalf of the finance company and retain the lion’s share of the sale proceeds (typically as much as 95%).

Operating lease

A further rental alternative is an operating lease—which typically extends for a much shorter period (e.g three to five years).

An agreed residual value of the HGV is agreed at the start of the lease agreement and when it ends you have the option of paying that sum to retain the vehicle as your own, or to simply hand it back to the finance company with nothing further to pay.

A further operating lease agreement, then provides you another new HGV to continue to use for your business.

Why not speak to us at ACF Direct to see how we can help you finance your next HGV? Contact us here.