OVL Lease Blog

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Thinking of leasing a car through your business? We outline the benefits.

19/03/2019

Thinking of leasing a car through your business? We outline the benefits.

In our latest article we’ve outlined some of the benefits of business car leasing, whether you're a sole trader or the owner of a Limited Company, car leasing offers many advantages when compared to buying a car outright or taking out a finance package

Lower Initial Rental - A major advantage of leasing is that you won’t need to spend big up front. With leasing offers from Little Green Car Leasing you can choose to pay 3, 6 or 9 months upfront and you’ll also have to pay the standard £199+VAT admin fee. 

Fixed Monthly Costs - Fixed monthly leasing costs make budgeting a breeze. With leasing, your business is essentially paying for the depreciation of the car, so the total cost is usually much lower when compared to taking out finance repayments to buy a car.Your Road Fund Licence is included in the leasing cost too.

Cash flow benefits - Cashflow will be in the minds of all businesses – everywhere! If your business is buying company vehicles, how is this affecting cash flow? Car Leasing removes depreciating assets from your company’s balance sheet and the associated risks of owning a vehicle, such as depreciation and disposing of the vehicle. 

VAT Claim Back - Companies that are VAT registered can claim back 50% of the VAT on the car leasing payments and 100% of VAT on maintenance. But on your monthly invoices you will be able to claim 50% of the VAT back – if you are VAT registered of course!You can’t claim 100% because there is – in 99% of cases – private use of the car. If your lease car is used solely for business – for example if it’s a pool car with no private usage – then you can claim 100% of the VAT back.

Corporation tax benefits – if you choose a car with CO2 emissions under 130g/km you can save in corporation tax as the full amount of the lease rate is 100% reclaimable against your company’s taxable profits. If you go above this breakpoint, you can only claim of the lease amount against your corporation tax. To make the most tax efficient use of a business car lease, go for a sub-130g/km car.

Maintenance -Taking out a maintenance package gives you great peace of mind and again is a good way to budget. 

Reduced Administration - All of the administration of the vehicle is handled by the leasing company, saving you precious time and if you have a number of cars in your fleet you might be eligible to use free Fleet Management software such as Fleet Manager Plus – helping with administration time further. 

Leasing companies will offer you impartial but expert advice. A leasing company will not try to sell you a specific make or model and will be focussed on finding the very best vehicle for you, fitting the needs of your business and the driver.

New cars have better safety features and fuel economy - Leasing brand new cars for your business will ensure that you all benefit from the safety features present on all modern cars and the fuel economy of driving a new vehicle. Reliability is also a factor, you can be confident that newer cars will incur lower costs and should anyone be involved in an accident safety features of new models will offer protection. 

Rewarding your people - Employee engagement is often reported as key to a successful business and by offering your teams the opportunity to drive a brand-new car, which is replaced after 3 or 4 years is an excellent way of saying ‘thank you’ and a great addition to any employment package.  The National Employee Research Survey showed that over 90% of employees feel employee recognition is important at work – a car as part of a remuneration package.

You’re in charge of choice - From the vehicle you want to drive, to your upfront payments and monthly costs you are in charge. You can also choose how long you lease the vehicle for and what your annual mileage will be. 

No finance agreement should be entered into lightly so do consider the following before you agree to lease.

Budget for the future - It’s important to be certain that you can meet the payments you’ve agreed to for the duration of the contract. You might have your eye on the latest top of the range 4x4 but is this realistic ...... don’t get carried away!

Early Termination Costs - If you need to terminate your car leasing contract early, you will be asked to pay a fee, typically 50% of any outstanding rentals.

Mileage -Customers that exceed their agreed annual mileage will be charged with an excess mileage at 'pence per mile' rate set at the start of your contract. Don’t underestimate your mileage just to get a cheaper monthly cost - it won’t work out to be cost effective.

Fair Wear and Tear - Customers must return the vehicle in a well-maintained condition. Any damage over and above “Fair Wear and Tear” will be subject to additional charges. Read more about Fair Wear and Tear

Insurance - Always factor in the cost of insurance. The leased vehicle must be insured with full comprehensive cover and for business lease agreements, the insurance certificate should be in the company name or a director's name. 

 

If you're interested in finding out more contact our friendly team today.