Benefits Of Business Car Leasing

Business car leasing is an extremely popular method of getting a brand new car for your company, with a range of perks.

We’ve made this handy guide for the many benefits of leasing a car through business that you might want to know if you’re considering getting a lease car through your company.

Key Benefits Of Business Car Leasing

Better cash flow

Leasing your car is a great way to manage your cash flow as you are able to budget your other expenses around the fixed monthly payments for your lease car for an agreed amount of time. There is also no need for putting a huge amount upfront, which would be the case if you were to buy a car instead. The cost for buying a car outright would massively impact your cash flow, and could also mean that your accounts don’t look as ‘healthy’ to potential investors. Instead, by leasing a car through low fixed payments, your money is freed up to help other areas of your business.

No depreciation worries

A car starts depreciating as soon as you buy it and will continue to do so. Instead of spending your business money on a depreciating asset, you can simply lease your car, paying regular payments and getting to change your car every few years. You will also avoid the hassle of having to sell the car once you want a new one, as with car leasing the car is simply collected for free and you can get another lease organised. Being involved in a business most likely means you are a busy person, and the last thing you want to worry about is having to sell your car.

Full warranty on lease cars

All lease vehicles will have a full manufacturer’s warranty included in the first few years of a car’s lifetime, which will usually cover the entire lease period. This gives extra peace in mind for you that a significant amount of potential faults with the vehicle are covered. Not only that, but breakdown cover is also included in the cost of a lease too.

Recruitment incentive

As a business owner, you may be running a company car scheme through your business. This is a great incentive that will attract and retain your employees. Your staff will not only appreciate a car for having the job, but also that the car is brand new as opposed to a second hand alternative. By using lease cars, your employees will also benefit from the latest safety features and other technology on a brand new car.

Tax Benefits Of Business Car Leasing

One of the biggest reasons that business car leasing has become so popular is due to the tax benefits available. These will usually be the reasons that businesses opt for a lease over other car finance options.

VAT recoverable

If your company is VAT registered you will be able to claim 50% of the VAT back if the car is used for personal and business use. If it is solely used for business use then you will be able to claim 100% of the VAT back. This can be a massive cost saving and makes business leasing significantly cheaper than personal car leasing. You will also be able to claim all of the VAT back on any maintenance costs for the vehicle.

Company accounts

Car lease payments won’t appear as a liability or asset on a company balance sheet, and instead they will be ‘off balance sheet’. This is extremely important if you are looking for credit and investors as this is what they will look at to make a judgement of your business. For this reason, you may be able to apply for more credit lines with your car as a lease as they are not seen as a huge liability unlike other car finance methods are.

No Benefit in Kind (BIK) tax on electric vehicles

If you’re in a lucky position and your employer has supplied you with a company car, then you will need to pay a BIK tax charge. This charge depends on the P11D of the vehicle, your earnings and also the CO2 emissions of the vehicle. However, the great news is that, with the aim to increase the number of electric vehicles on the road, the Government introduced new tax rules so that company car drivers will pay 0% tax on electric vehicles. So, an even bigger saving made through business leasing!

Pros And Cons Of Business Car Leasing

Pros Of Business Car Leasing

• There will be a much better cash flow for your business
• It can be cheaper than personal leasing
• You won’t have a depreciating vehicle to worry about (or sell)
• The VAT can be claimed back on the monthly payments (50% if used for personal and business or 100% if the vehicle is solely used for business)
• You can have your staff driving the latest car models with new safety features
• Leasing a car is a really simple process, freeing up your time elsewhere

Cons Of Business Car Leasing

• You can’t make any permanent modifications to the car
• There will be an agreed mileage limit for the duration of the term
• If the vehicle is beyond fair wear and tear damages, there will be a charge when returning
• You may need to pay more National Insurance if providing your employees with company cars
• Employees will need to pay a Benefit in Kind (BIK) tax on a company car to account for the additional value that is being provided on top of their salary (although there is no charge for electric vehicles)