As we’ve mentioned before there are many moving parts when it comes to quote for a finance agreement, which means that comparing like for like can be difficult. It is key to know what to watch out for when looking at the figures and overall costs, to make sure you aren’t surprised when you ultimately enter into the agreement.
So what should you be looking out for?
End of term arrangements
Whilst what happens at the end of your agreement will vary depending on the agreement type and the equipment that was financed, it is always sensible to get written confirmation of the process up front.
A hire purchase agreement is straight forward – there is a contractual option to purchase fee for a nominal amount which is collected by the funder along with your final payment. After this has been successfully paid title passes to your business.
The end of term on a lease varies a lot more and generally won’t be detailed on the agreement you sign for the funder. This is because a lease is accounted for as an expense and therefore you can’t be passed ‘title’ at the end of the agreement. The exact end of term arrangements will depend on the funder, broker and type of equipment with some being far fairer than others.
it is always sensible to get written confirmation of the process up front, so that all costs can be factored into your decision making early on.
Minimum term arrangements
With a Lease Rental agreement, there are two different types:
Fixed Term
This means that the agreement runs for the pre-agreed term, and once your final documented payment has been made, the agreement is complete.
Minimum Term
On this type of agreement, notice is required to be given to the funder for the rentals to cease, without this, payments can be collected beyond the pre-agreed term, often with no limits.
Again planning is key, if you are aware that you are being offered a minimum term rental, you can request a fixed term agreement. If this isn’t an option (there are a few funders who only offer minimum term), you can diarise to give the necessary notice.
At Focus we only offer minimum term rentals where this is the only option and where this is the case we email you a month before notice is required reminding you to give notice.
Additional Fees
On most agreements there will be a documentation fee – this is stipulated by the funder and is not charged by the broker.
Some funders will also charge annual service fees, to cover the costs of in-life queries such as settlement figure requests etc.
By making sure you know all the detail of an agreement you can be fully informed when making a decision. You will be able to calculate the lifetime costs of the agreement, which is so often overlooked when comparing finance quotes. At Focus, we pride ourselves on being up front and transparent so that we can manage expectations from the outset, saving time all round.