WITH company car registrations still on the increase more and more UK businesses are taking a closer look at the best way to finance these expensive acquisitions.
And in a lot of cases they are opting for finance lease as the best way forward.
It’s now seen as a sensible compromise between owning your company car and outright business car usership known as contract hire.
Finance lease has all the benefits of ownership, but many of the cash flow and VAT advantages of contract hire.
VAT advantages of finance lease
Assuming there will be some private use of the company car, 50% of the VAT charged on the rentals of a finance lease can be reclaimed – the same as contract hire.
The finance company which provides the car also gains as it can reclaim the full 100% of the VAT on the purchase of the vehicle; it can then pass on this VAT saving in the form of lower rentals to you.
Cash flow advantages of finance lease
Having decided on a finance lease for your company car you have to decide which of two types available is more suitable for your business. The choice will be based on your company’s current financial position and whether you:
- want to take advantage of reduced initial payments followed by a balloon payment or
- go for a full payout lease.
If you opt for the first you sell the car at the end of the finance lease rental agreement which should cover the final balloon payment – an agreed amount that should cover the residual value of the business car. Be aware, that if the sale proceeds doesn’t cover the agreed amount, you will be liable for the shortfall.
In a full payout lease you can sell the car on behalf of the leasing company, having paid for the cost of the car in the lease rentals, and then receive up to 95% of the proceeds of the sale in the form of a rebate from the rental company.
Alternatively if you still enjoy driving the car you can enter into a secondary rental period with the finance, often called a ‘peppercorn rental’, as it costs very little per month.
In many ways finance lease is very similar to hire purchase. But there is a difference. Under an HP agreement title to the car transfers to you; in a finance lease your business never owns the company car. See the section below.
Northgate are in it for the long haul
WHEN it comes to long term rental, Northgate offers a comprehensive range of support packages for SMEs, with a wide range of fleet solutions to meet the diverse needs of
ChargedEV – helping SMEs on their electrification journey
CHARGEDEV specialises in the supply and installation of Electric Vehicle charging equipment across the UK and having installed over 23,000 domestic and workplace EV chargers to date, it has become
R2C – digitising the fleet management process
R2C Lite has been created to eliminate labour-intensive administration processes, aid compliance and increase business productivity for SME fleets running HGVs, vans, trucks, trailers and more, many of which will
Northgate’s mobility solutions keeping you on the road
NORTHGATE Vehicle Hire's additional mobility solutions options and support packages can be built into its existing rental contracts, cutting down the need for multiple supplier agreements to be signed and
BMW – looking after fleets large and small
WHETHER you are a sole trader looking for a car that works for your business or you manage a fleet of fewer than 50 company cars, the BMW Business Partnership
BMW i4 – makes a lot of sense for the company car driver
THE new BMW i4 is the German premium brand's first ever all-electric Gran Coupé and it's a very interesting proposition for company car drivers with a 2% BIK rate for
Innovation drives Wilson Auctions’ success
AS one of the first in the industry to introduce MVR (Motor Vehicle Repair Workshops) on its various auction sites nationwide, Wilson Auctions was highly commended in this year's Business
Tax efficiency – BMW’s X1 PHEV, a Business Motoring winner
BMW's X1 xDrive 25e is a Business Motoring winner, picking up the Best Small SUV gong at this year's awards. It features a 1.5-litre three-cylinder petrol engine and electric motor
BMW X5e – makes real sense to drivers and fleet managers
THE BMW X5 xDrive 45e offers user-choosers a large SUV which delivers low running costs and associated tax bills. Thanks to CO2 emissions of 27-31g/km, the X5 falls into the
Van Monster Remarketing – tops for Business Motoring Awards
EXCEPTIONAL levels of customer service are at the heart of the Van Monster Remarketing proposition. The personal nature of the service provided by its Remarketing account managers has enabled to grow
BMW iX electrifies the Business Motoring Award judges
THE BMW iX will add electric performance to any forward-thinking fleet manager, as well as a spacious, lounge-like interior to keep drivers focussed on the road ahead, with a range
BMW iX3 brings electricity into the mainstream
Following the i3 and i8, the BMW iX3 is the brand's first electric SUV and the winner of this Year's Business Motoring Awards Best Medium SUV category. And the electric
Executive express – BMW530e offers savings for company car drivers
THE BMW 5 Series Saloon is the epitome of a sporty business saloon and The 530e plug-in hybrid models combine performance and frugality to create an optimised executive car. With
KeyFleet Partner Programme – Best Company Car Programme winner
WITH electric vehicles on the rise and with many government initiatives and support of the EV revolution, KeyFleet has become an ambassador for EVs.All employees are trained in Whole Life
Keeping up with the times – Europcar, Business Motoring Award winner
MULTI-MODEL mobility is becoming increasingly important for SMEs, particularly in the short-term rental arena and the EuropcarOne mobility platform provides seamless access to a full range of solutions, from daily
SOGO – Business Motoring Best Mobility Provider Winner
SHORT-TERM leasing is essential to the mass adoption of electric vehicles before 2030 when sales of all new cars and vans powered wholly by petrol and diesel will be banned.
Flexibility is key – Europcar, Best Long Term Rental
FROM COVID-19 and semi-conductor shortages impacting on vehicle supply to rising inflation and uncertain trading conditions, the past 12 months have not been easy for any business. But they have
Leave A Comment