BUSINESS car leasing is a way for SMEs to operate company vehicles with low monthly installments and agreed mileage over a contract period – usually two, three or even four years.
The monthly rental is paid for the lease of the car and at the expiration of the lease you return it and begin the process.
So if you’ve not thought of it before Let us look at six reasons you should think about leasing a business car.
1. Fixed cost motoring for your business Avoid depreciation
If cash flow is tight and you have capital available at a premium is the last thing you’d want is to tie up your business in bank loans or overdrafts to corporate vehicles.
Business car leasing eliminates the need to find the initial capital to finance company cars, as you pay only the fixed monthly amount, so that cost is expected and budgeted for.
When the contract period is over the car is then collected and then sold, taking away the burden of depreciation and dealing with the sale.
2. Improved cash flow
Buying cars is capital intensive and with contract hire, you could invest the money into the business and enjoy better cash flow
One of the most appealing aspects regarding leasing a business vehicle is that it’s an additional credit line, which means that you’ll free up cash to invest in your business and alleviate concerns about cash flow. As we’ve mentioned above, you can stop using the cash you earn on an asset that depreciates when it could be used for the expansion of your business.
3. New cars can be purchased at fleet discount
With lots of lease and contract hire companies looking to acquire your business, it’s a buyers market.
Be sure to shop around to get discounts on the latest models. Make use of the expertise of your small fleet leasing provider to locate the most affordable deals for you.
These fleet leasing companies are experts in this area they could help you find a cheap car you’ve never previously thought about.
Some companies also offer a price matching service So make sure you inquire before making any deal.
4. Keep your employees in most modern vehicles and enjoy new safety features and improved fuel economy
Your staff and business will benefit from the dependability as well as the durability and incredible fuel efficiency when you drive the latest makes and models. They will save you money as well as their personal expenses also – as well as reducing their exposure to corporate car tax. Plus, should the worst occur, they’ll be safest with the safest cars.
If you are VAT-registered, then you’ll be able to claim 50% of the VAT back
5. VAT benefits – half of the VAT is reclaimable
Car leasing for business is subject to VAT. But on your monthly invoices you can get 50% of the VAT back – provided that you’re VAT registered of course!
You can’t claim 100% because there is in most instances – private use of the car. If your lease car is used solely in business – as when it’s a pool vehicle without private usage then you’re entitled to 100 percent of VAT back.
In any case, it’s a VAT efficient way to fund the business vehicles you use.
If you have a maintenance agreement along with your monthly rental of a business vehicle that you pay for, then 100% of the VAT on that cost can be reclaimed. There’s no limit.
6. Corporate tax benefits – 100 percent reclaimable on cars with a fuel consumption of less than 130g/km
Pick a vehicle with CO2 emissions under 130g/km and you’ll save on corporate tax since the entire cost of leasing is to be reclaimed from your company’s taxable profits.
If you go above this threshold, you can only claim of the lease amount against your corporation tax. To make the most tax efficient use of your business car lease, opt for a sub-130g/km car.
A business car lease for you?
The final decision of whether or not to sign a business car lease to the SME small fleet depends on many variables that can change such as the mileage, personal tax arrangements and the model of car.
As a package as a package, business car leasing can be an effective outsourcing option that can save you time and uses your finances cost-effectively for financing new cars for you SME smaller fleet.
It’s worthwhile looking at the internet-based UK car leasing firms to find out what you can get for your business.
If you’re not sure then talk to a lease specialist and your financial advisor to figure the best option for you.
Read similar articles over on this motoring blog.