Affinity schemes provide access for employees or groups of affiliated individuals to preferential discount terms on new cars, combined with a range of attractive funding options.
Questions you may ask :
- Why would I use an affinity scheme?
- Affinity/Eco/Salary Sacrifice what are the key differences?
- Do I have to pay benefit in kind tax?
How does it work?
There is no formal corporate commitment other than to promote the facility. Schemes exist in lots of varying formats and product structures.
Often schemes are supported with a fully integrated on-line quote and order system, saving individuals time in visiting dealers. As far as financing is concerned, employees can select a plan over a period that suits them with an annual mileage contract that is aligned to their personal needs.
This is an employee acquisition scheme so has no business cashflow implications.
Cost Of Finance
Typically through a structured affinity scheme lower costs of finance can be secured.
Supports employee budgeting by offering a competitive finance method to acquire a new vehicle.
This will be dependant upon the type of finance agreement and the terms of the finance company financing the vehicle. It is now becoming more common place that contracts of this type will allow for changes in their terms relating to contract mileage and duration.
NO Input VAT will be recoverable on the purchase price and no input VAT is chargeable on the finance rental as these charges are paid by the employee.
Residual Value Risk
This will be dependant upon the type of affinity agreement in place. Options exist wherby the residual value exposure is transferred to the finance company or could be retained by the individual acquiring the car.
Tax Deductible Expense
These agreements are personal agreements between the individual and the finance company with no business involvement and as such costs incurred would not be tax deductible.
Vehicle Management and Administration
Vehicle Management and Administration - it is typical that the management and administration associated with this vehicle acquisition method is provided by a specialist Fleet management company / finance company, allowing you to free up your internal resources to focus on core business activities.
Early Termination Costs
Early Termination Costs - there are varying formats for calculating charges in the event that a vehicle is returned prior to the agreed contract end date. In a simple form early termination charges may be expressed as a percentage of outstanding rentals (Typically 40 or 50%). Charges will be dependant upon the type of finance agreement chosen at the onset of the contract.
Excess Mileage and Damage Charges
Excess Mileage and Damage charges - when a fixed monthly rental is calculated the services charged for and depreciation recovered in the finance rental is based on the contracted mileage and assumed return condition at the end of the contract. If the return mileage is greater than the contracted mileage or the return condition is below the industry standard for a vehicle of similar age and mileage than additional charges will be levied to compensate the financing company. These charges should reflect market conditions and therefore would be in line with other acquisition methods, however depending on the finance company may include some form of incremental administrational charge or penalty.
Option To Own The Vehicle
This would depend on the specific funding acquisition method. Products such as personal contract purchase would allow an employee to retain ownership, subject to a final payment. With personal contract hire the vehicle is merely returned at the end of the contract.