Market analysts Plimsoll calculate that there are 919 private coach hire and tour companies currently operating throughout the UK. They provide private hire services, school runs and tours for visitors and tourists. By no means all of these companies, say the analysts, appear to be in a state of sound financial health.
At the root of many of the problems likely to be encountered by any company in this sector of the logistics industry is the sheer capital investment in the coaches themselves.
Investment and re-investment in your rolling stock is likely to be a never-ending cycle and that pressure is likely to intensify as government presses forward with its plans to put more low emission buses on the roads.
In short, you are almost certain to turn to coach finance or refinance to ensure that your vehicle fleet – or even a single coach, if you are a small company – remains competitively placed in what is a constantly changing and an increasingly fast-moving industry.
Your funding options are essentially determined by whether you aim to own the coaches you operate or lease them over an intermediate or long term.
Here at ACF Direct, we are specialists in arranging the following principal funding options:
- however successfully your company has been operating, it is unlikely that your retained profits extend to the regular purchase, replacement or renewal of coaches;
- if your intention is to own the coaches, therefore, you are in search of some form of borrowing or credit;
- for this type of purchase a tried and tested method is hire purchase – requiring an initial deposit of typically around 10% of the purchase price, followed by equal monthly instalments;
- only once the final instalment is paid does ownership of the asset or assets transfer to you – and until then, you may not sell the coach or coaches until the outstanding finance has been cleared;
- a finance lease, for example, typically lasts the whole of the effective working life of your coach – you are hiring it from the lessor until its value has been more or less completely written down;
- throughout that period, you maintain exclusive use of the vehicle or vehicles leased in this way;
- at the end of the lease, you typically have the option of continuing to pay a token rent (usually a month’s rental per annum) to continue to use the vehicle or to sell it on behalf of the finance company and retain the major part of the sales proceeds (typically 95%);
- as the term suggests, an operating lease tends to be for a shorter period – typically, no more than five years – during which the vehicle or vehicles are hired;
- at the end of the lease period, you may take ownership of the assets by paying the assured residual value of the vehicles at that time (a value agreed by the lessor at the beginning of the lease), or hand back the vehicles to the lessor with nothing more to pay;
- at that stage, you may use any equity you have built up in the vehicles to use as a deposit for a new operating lease for a further intermediate term.
If you are looking for coach finance or refinance, therefore, there are a number of options you might want to pursue, depending on your longer-term aim to own the particular vehicles, to arrange an operating lease for the next five years or so, or continue to lease the vehicles over the longer-term through a finance lease.