How do I account for a finance lease?

For purposes of the ownership of your company car, the leasing company holds title to it (although the car is shown as an asset on your company’s books).

However, there are no capital allowances available on a finance lease. Instead, until the end of March 2018, the rentals are fully tax deductible in the first year if your car has CO2 emissions below 75g/km, and then for 76g/km-130g/km – 18% capital allowances, and 131g/km or more – 8% capital allowances.

Fleet Alliance comment on finance lease

“Finance lease is a niche product which provides a flexible alternative to other products, such as contract hire.

“It is a particularly strong offering for clients with commercial vehicles on two counts. Firstly from a mileage perspective – where a client is unsure of the mileage pattern finance lease can be more effective than contract hire, or contract purchase.

“Secondly, commercial vehicles which are prone to damage may be better served under a finance lease than they would be in a contract hire agreement. This avoids potentially penal end of contract refurbishment costs on a typical contract hire agreement.

“Whilst it is hard to envisage finance lease having anywhere near the market share of the more ubiquitous contract hire – it nevertheless remains a core part of the staple funding options for small fleets.”

Martin Brown

managing director of fleet solutions provider, Fleet Alliance