A Funding Agreement where the title to the vehicle passes
to the customer when all payments and fees have been made.
Agreements are often constructed with a deferred payment
(Balloon) equating to the anticipated value of the vehicle
at the end of the agreement and this allows both low initial
and monthly payments.
The customer is responsible for depreciation, maintenance
costs and all risks of ownership.
Advantages 1. Customer
gains ownership of the vehicle. 2. Vehicle
appears on company balance sheet. 3. Customer
has equity in vehicle to pay deposit on next vehicle. 4. Customer
claims writing down allowance. 5. No VAT on
monthly payments.
Disadvantages 1. Higher initial
outlay. 2. Higher monthly
cost. 3. VAT not
reclaimable. 4. Customer
bears risk of depreciation of vehicle.
