The vehicle finance market has recently seen some notable changes. The Autumn Budget and a key court ruling have introduced updates that could influence how businesses approach vehicle financing. Understanding these changes can help you make better decisions and stay ahead of the curve. In this article, we break down what’s new and provide practical guidance.
Capital allowances and full expensing explained
Before diving into the updates and what they could mean for your business, it’s helpful to understand two key terms we’ll be using: capital allowances and full expensing.
- Capital allowances give businesses tax relief by allowing them to deduct the cost of certain assets from their profits. There are several forms of capital allowances that help businesses reduce their tax burden in different ways.
- Full expensing is a type of capital allowance. This policy lets businesses fully deduct the cost of certain capital investments. They can do this only in the same year the investments are made.
Highlights from the Autumn Budget 2024
In the Autumn Budget 2024, it was announced that there would be no immediate changes to the full expensing policy. This means businesses can continue to fully deduct the cost of certain assets in the first year, reducing their tax liability.
The government also mentioned the possibility of expanding full expensing for leased assets as well in the future. This could be particularly beneficial for businesses looking to upgrade or expand their fleets through company vehicle leasing. No specific timeline has been communicated yet.
The Chancellor, Rachel Reeves, also highlighted ongoing efforts by HMRC to work with stakeholders to improve and clarify guidance on capital allowances, which could help reduce uncertainty for businesses.
Additionally, the Budget extended the 100% First Year Allowances for:
- Zero-emission cars
- Electric vehicle charging points
The extension runs until March 31, 2026, for Corporation Tax purposes, and until April 5, 2026, for Income Tax purposes. This decision demonstrates the government’s commitment to promoting the adoption of electric vehicles.
Changes to the treatment of double cab pick-ups
A significant change is the reclassification, for capital allowance purposes, of double cab pick-ups with a payload of one tonne or more. From April 2025, they can be classified as cars for capital allowance purposes. This shift could influence how businesses claim allowances for these vehicles and may affect acquisition strategies. This would particularly impact decision making in the construction or farming sectors where double cab pick-ups are common.
Earlier FCA investigation and its impact on vehicle finance
Earlier in 2024, an investigation by the Financial Conduct Authority (FCA) into misleading sales practices had already started changing the landscape of vehicle finance. This led to:
- Some major banks pulling out of the market altogether
- Some major banks and ‘Tier 1’ lenders raising their rates.
However, this change has opened doors for newer banks and fintech lenders who are more eager to offer competitive rates and more flexible terms than traditional banks and ‘Tier 1’ lenders.
Court of Appeal ruling on consumer vehicle finance: transparent commission disclosure
On 25 October 2024 a Court of Appeal ruling highlighted the importance of transparency in consumer lending, specifically in motor finance agreements. The court found that lenders were liable where they did not disclose commissions. The court ruled that this would otherwise create an “unfair relationship” and violate consumer rights protections. The ruling states that a broker could not lawfully receive a commission from the lender without obtaining the customer’s fully informed consent to the payment.
Although this ruling specifically addresses consumer vehicle finance, it demonstrates the importance of having clear, fair and transparent financial agreements.
At Capitalise, we prioritise transparency in all our communication & transactions, ensuring business owners have clarity at every step of their application process. For instance:
- We inform clients that commission will be paid from the initial inquiry.
- At the indicative offer stage, we reiterate this information.
- When loan terms are communicated, the exact commission is detailed.
- Our funding specialists also walk clients through the commission structure to ensure full understanding.
By maintaining this level of transparency, we aim to give clarity to business owners so that they can make fully informed decisions.
If you’ve struggled to find vehicle finance with the withdrawal of some high street lenders from the market, we can help. Whether you need to upgrade your fleet or finance a single vehicle, we can guide you through the available options so you can make a well informed choice that supports your business goals. Plus, with our vehicle look up feature, you can search any UK registered vehicle and we’ll give you an industry guideline price to understand what lenders may provide to purchase or refinance your vehicle. From there, you will be able to complete an application and can receive multiple offers or quotes. Sign up for free today to search for vehicle finance.
