Contract Hire Specialist

First off, let me say a huge THANK YOU to all of you who have taken the time to share your feedback with me – you can’t imagine how much it means to me to have the blogging acknowledged.

Please also share with me what you would like to see posted here, what topics should be covered in the future, with regards to contract hire, leasing, motor insurance etc.

 End of Quarter 1 is just around the corner (!) so not a bad time to reflect on some big and small changes that have occurred since the start of the year with regards to financing and leasing a vehicle.

 There have been many, and most have been ignored by our media.

 The biggie was the VAT ‘reset’ to 17.5% at the start of 2010 from the previously 15% enjoyed by all consumers.

I don’t know about you, but I prefer to keep more of my hard earned dosh in my pocket. VAT increase has an immediate affect on everything. First and foremost – fuel costs go up. Our current economy (and for the foreseeable future despite Al Gore and honchos) is based on fossil fuels and any tinkering with VAT impacts fuel prices.

Fuel prices in turn have an impact on every single thing which forms part of our daily life, food, clothes, electricity, water – you name it. Technically food may not be vatable, but the transport of food certainly is. And who do you think gets saddled with the extra costs?

 Not surprisingly, the VAT increase also affected the price on cars; let me explain.

Every vehicle has a VAT element as part of the On The Road price. (OTR is an acronym we can leave aside for now and which will be covered at a subsequent blog.)

When VAT is tinkered with, it immediately changes the ‘bottom line’ price of the car. Even businesses who can claim back some – or all – of the VAT outgoings on their lease are also affected by this increase. The VAT that is reclaimable is only on the monthly lease but the car price increase will push up the monthly rentals.

If you think this VAT ‘reset’ is the last we’ve heard – you have got something else coming. Many experts believe that a further VAT increase is imminent. Never mind that we are already overtaxed and spend about 6 month of the year working to enable our elected representatives to spend to their hearts’ content, VAT rates will likely again be tinkered with.

Mind you, the recent “scrapage scheme” where older cars where traded in for new one’s gave HMRC a boost as it brought in more money in VAT then it ‘spent’ on the scheme – but that is besides the point.

While the rest of us spent the new year raising our wine glasses in hopes for a better future, some of spent it by raising the Vodka And Tonic (he,he,he…).

 

 

Millions of Britons are being charged heinous amounts of interest or are being refused credit altogether.

 

The issue is not as complicated as banks and others make it out to be, but neither is simple nor obvious. How do the financial institutions measure your risk?

 

And don’t kid yourself that it does not affect you, the way in which your risk is measured affects you almost every day in more ways than you can imagine. Are you applying for a credit card? A bank account? A mortgage? A car loan? A mobile phone? Cable TV? Broadband connection to the internet?

These and hundreds of other ways in which we request overtly or covertly the financial institutions’ resources invite them to measure your risk profile.

 

And to top it off, every time you are refused, a ‘blotch’ will appear on your report which in itself will push your score lower. A classic case of Catch-22.

 

How do they measure consumer risk? The answer lies in two words – Credit Score.

Every person has a credit score based on historical behaviour and it is largely this historical record that finance institutions use to determine how our behaviour will most likely be in the future.

 

There are other factors involved as well such as employment but a large part of your score is determined by historical behaviour and monetary habits.

 

A higher score translates in cheaper finance rates and faster decisions by the decision makers.

In today’s financial climate more than ever, it is imperative that you aim for the highest possible score.

 

A low or average score should not be taken personally as none other than one of the greatest world investors found out when he received only an above average score!

 

Though the US and UK have different ways of calculating the numbers, they are not much different.

 

There are three things you will have to do.

 

The first thing you will need to do is to get your credit score and find out what it is.

 

Often there will be factual errors that will damage your score and than can be fixed with a simple phone call or letter.

 

Second thing to do is to dispel myths and facts about improving your score.

Much of what you will read in the link above applies to the UK as well.

 

The third and final shield in your defence arsenal against high interest rates and fees is – patience.

 

It takes time for modified behaviour and factual changes to start having an impact on your score. Give yourself at least 6 months of being actively engaged in the process and then request your score again.

 

Good luck!