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Car Leasing; is it right for your business?


Car leasing originated in the US and has slowly become a worldwide phenomenon, spreading to the UK and the rest of Europe as an economical way to access vehicles without breaking the bank. Businesses that require fleets and businesses that supply their employees with company cars are now starting to take advantage of the leasing process. They realised that the capital investment being invested in buying vehicles could be allocated to improving other aspects of the business. Leden Leasing specialises in sourcing and delivering business leases to small/medium sized businesses and eliminating the costs involved with owning the vehicle.

To help you decide if your company would be better off with a business lease we have put together this simple guide to business lease. This shows the differences between lease agreements, which car will suit your needs and how leasing can benefit your company.

Is leasing right for my business?

Before you can decide if car leasing is right for your business you need to breakdown your costs, for example you’ll calculate [how much you spent on the vehicle] – [how much you sold it for] / [how long you had the vehicle for (in months)]. There are also other considerations like the cost of road tax and interest paid if bought on credit, selling fees, advertising fees, your time and depreciation. Buying a car outright can put restraints on the company as, instead of investing capital into other aspects of the business, it will be tied up in other vehicle related costs.
With these considerations in mind, including the stress involved with selling a car, it is obvious why most business owners opt for the leasing option for their business needs. Businesses end up spending the same amount, if not less money, on leasing the same or an identical car, also factoring repair fees into the costs.

Benefits of Business leasing

Reduce your tax bills
– Business leasing payments are tax allowable expenses so it can be deducted from final tax payments.

Protect your capital – The money that was meant to be spent on fleet can now be invested in other aspects of the business.

Reclaim VAT – VAT registered businesses can now reclaim up to 100% of their VAT payment if the car was used exclusively for you business needs. You can also reclaim up to 50% of your total VAT payment if the vehicle was used for both business and personal purposes.

Accurate Budgeting – Leasing allows you to know exactly how much you will be paying monthly which will improve cash flow and in turn allows you to budget a certain amount each month.

The types of car leasing for businesses


Contract Hire – This is one of the most popular leasing options available to businesses in the UK and is available to both business users and private individuals. However, businesses can gain tax advantages by claiming back VAT so they are already a step ahead of the competition. This option is perfect if you want to control the costs of maintenance and relief vehicles as they are included in the overall cost.

Finance Lease - This option is perfect for businesses that are VAT registered. It enables a company to either pay the cost of the vehicle over a set time (plus interest) or pay a lower monthly cost and a final payment at the end. The final payment is based on the anticipated resale value of the car after depreciation. There are car finance calculators online that can help with finding out exactly how much you need to fund your business finance cars.

Contract Purchase – This option offers the company leasing the car the option to buy it outright from the finance company at the end of the pre-agreed contract date. The monthly payment for this option is worked out by calculating the difference between the car’s cost and the expected depreciation. However, a minimum guaranteed future value (balloon payment) is also calculated, the balloon payment is the amount that will secure ownership of the vehicle at the end of the lease.

Employee car-ownership schemes – These are complex schemes that offer tax benefits to employees and work out cheaper for the employers particularly in companies that run a large fleet or companies with a low staff turnover. In these schemes the ownership of the cars is transferred to the employees so they do not have to pay the ‘Benefit in Kind’ tax and the employers do not have to pay national insurance on the car benefits. This is the only scheme where both the employer and employees have to contribute to the fixed monthly payments.

Choosing the right company car

In order to choose the right car for your company there are a number of things that need to be considered. For example, you need to choose something that suits your company’s lifestyle, something that has good miles per gallon (mpg) or something luxurious to boost your business image.

Conclusion

As is the case with any business decision, leasing can depend on a variety of personal circumstances. To take full advantage of all the benefits of business car leasing – including frequent upgrades, the ability to afford better quality vehicles and no worrying about issues like depreciation and road tax – get in touch with Leden Leasing today. Call us on 01707 874 832 or fill out our Contact Form to find out more about how much you could be saving.

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Posted on 21st September 2016 at 12:24 PM

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