Funding Methods - Outright Purchase

Disadvantages:

Ø Cashflow: significant front end costs may divert money away from being invested in the company. There's a minimum opportunity cost - what the money might be expected to earn if invested - of around 8%.
Ø Exposure: the fleet becomes vulnerable to residual value variations and exceptional maintenance costs. This method of funding needs high calibre expertise to manage well.
Ø VAT only recoverable if vehicles are used 100% for business.