Vehicle Hiring Cuts Taxation
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OPER A TORS are becoming interested in the possibility of hiring fleets of vehicles from finance companies, instead of buying them outright. One of the great advantages of this system, a well-known financier told "The Commercial Motor," is that the hire-charge is placed against revenue and indirectly reduces liability to tax, whereas, apart from depreciation allowance, capital expenditure on the purchase of vehicles does not attract relief from taxation.
Now that heavy taxation on companies is beginning to have its -ffects and many businesses cannot finance large capital expenditure out of reserves, the system of hiring is likely to grow. One of the leading finance houses has already accepted two proposals of this nature from large fleet operators and two more are under consideration. In each case, the capital value of the vehicles to be hired is in the region of £60,000.
The operator hires the vehicles for an agreed annual sum spread over their expected life—for instance, five years— and uses them as though they were his own. At the end of that period the finance company will auction them, so that there can be no suggestion of illegal hire-purchase. The operator can then have a completely new fleet.
Before nationalization, this system was widely used in connection with railway wagons and, to a limited extent, still is.
PRICES HELD DOWN: LOWER PROFITS
BECAUSE the company had tried to hold down the prices of its vehicles at a competitive level, despite increases in the costs of components and accessories, the percentage of profit in the past financial year had fallen, said Mr. R. H. Seddon, chairman of Seddon Diesel Vehicles, Ltd., in his annual report.
The company's export business had been kept up and 58.4 per cent. of its production was shipped overseas. Difficulties arose not from a lack of orders, but from currency and import restrictions. "We are fortunate in having our exports fairly well spread in many countries, because despite the closing of our valuable Australian market—temporarily we hope—we have been able to maintain our export figures. "Many of our overseas customers are now demanding, more than ever before, modifications to suit their own operating conditions," said Mr. Seddon. "One customer insists that one of our models, of which he buys a number, must be capable of maintaining a speed between 50 and 60 m.p.h. But, then, his country, which was occupied by an enemy during the last war, has invested large sums of money in good roads."