WHAT is the most efficient way financially to lease your company vehicles?
Business Car Leasing. This is a set price for a set period of time. At the end of the contract period, you simply give the car back – job done.
Business Car Leasing has many advantages for small businesses although it depends on the company’s financial circumstances and the specific requirements of the business.
What should be considered with a Business Car Lease?
It can protect your business from depreciating assets, new cars being a classic example. Rather than buying company cars, a lease arrangement can help smooth the cost of motoring.
A monthly figure is set period of time, which is much easier to budget into the business finances. Choose from 24, 36 or 48 months, set your mileage allowance (from 8,000 per year), upfront deposit (3-6 monthly rental payments) and consider an optional maintenance plan.
Finally, when it’s time to return the car at the end of the contract period, the vehicle’s actual value is not your problem, and neither is selling it.
Leasing is a much smaller financial commitment than buying a vehicle, allowing you to invest your finances into the business and improve cash flow.
In effect, Business Car Leasing acts like an extra line of credit, freeing up money that would otherwise have to be put into financing your business motoring needs.
Business Car Leasing is a mature and competitive market with many leasing companies vying for your custom. This is good for you, the customer, since it puts you in the best position to negotiate a good deal.
Decide on your budget and the car make and model that suits your requirements, then use this as the basis for shopping around for the best prices.
Don’t forget to negotiate hard for optional extras too –upgrade specifications, roadside assistance, maintenance plans, insurance discounts etc.
Make sure you find a proactive company with great customer service and remember: they need you more than you need them.
What are the tax implications?
Business Car Leasing is subject to VAT and as a VAT registered business you’ll be able to claim half of this back, which could make a significant impact on monthly payments.
If your company car use is solely for business, such as in the case of a pool car with no private use, a 100% VAT back claim is permissible. In reality, though, most company cars include an element of private use, which would void the claim.
If you take out a maintenance plan in addition to the monthly business car rental, it is possible to claim all the VAT back on just the maintenance part.
What are the hidden costs?
Leasing may seem like a smart financial move for your company, but it is important to take a closer look at what you are paying for. Usually, leasing a car will involve limitations and restrictions.
A mileage limitation will determine how far you can travel during the lease period; often these are not realistic and you face a heavy penalty if you go over, or alternatively the monthly repayments skyrocket if you increase the limit.
Other possible fees include early termination charges, closing costs and vehicle destination and acquisition fees.
Watch out for protection products, such as windshield protection and maintenance plans, which are extortionate and cost much more than it would cost to repair yourself.
With a convincing salesman and complex contracts that use terms like net capitalised and residual value; it can be difficult to negotiate and understand exactly what you are getting and how much it is costing you.