Should You Buy or Lease Your Next Business Car?
Business car leasing is rapidly becoming an established norm in the world of new car finance.
There are various reasons for this, but key to the growing popularity of business contract hire is the flexibility and tax advantages it offers to eligible small and medium-size enterprises (SMEs). With fixed monthly payments, contract hire is the perfect solution for businesses looking to lease new vehicles.
Leasing a company car vs buying one is a vexed question for most small business owners. Most entrepreneurs are pretty familiar with buying a new car outright, but leasing is still unfamiliar territory to some, despite its growing popularity in the UK.
Difference between buying and leasing a business car
The fundamental difference between buying and leasing your next business car is that if you buy it, it becomes an asset on your balance sheet.
You can drive it without any mileage or other restrictions, and if you buy it outright, there are no contract stipulations for you to stick to. It’s yours, to use in whatever way you want.
If you don’t want to commit all your cash up front, you could buy your business car through a purchase hire agreement and pay for it on a month by month basis. Depending on the settlement figure, you could even end this agreement early, and pay off the entire vehicle.
Either way, the car becomes yours, but it also becomes a commitment. Whether you’ve had to stump up money upfront to buy outright, or you’re looking to pay for it on a monthly basis, the car you own is an asset that is losing its value the longer you keep it.
You’ll also have to consider potential ongoing costs of maintaining it, the longer you own it.
Why leasing is better than buying a car?
If you're trying to decide between leasing or buying a car, take a look at some of the advantages of leasing a business car.
When you lease a car through a contract hire agreement and you are a VAT registered business then you can reclaim 50% of the VAT on the lease payment (its 100% of the VAT on Vans but thats a different story)
Your lease payments are deductable against Corporation tax though there is a small restriction for higher Co2 cars, (tax-deductible expense), once again very low or zero C02 vehicles such as Electric Cars are the most efficient.
Fixed Monthly Costs:
When you lease a car through a contract hire agreement, you can use the car for the length of your agreed lease by paying a monthly fee.
This will be a fixed monthly cost, agreed in advance when you sign your contract. This gives you excellent control over your budget.
Providing you have kept to the conditions of your agreement, including mileage, then you’ll have nothing more to pay.
No Depreciation Costs:
This gives you the flexibility to change your business car regularly, without having to worry about it depreciating in value. At the end of your agreed business car lease, you simply hand the vehicle back.
Drive a brand new car:
It also means you get an excellent choice of new models to drive, with the latest features.
Business car hire deals come with optional maintenance packages, which will give you peace of mind when it comes to ensuring you’ve always got reliable business transport on hand. It won’t be your responsibility to get your car fixed.
Summing up :
Leasing is the perfect way of managing both your finances and your resources efficiently and effectively – essential in uncertain or challenging economic times.
For more information, please contact LetsTalk Leasing on 0330 056 3331. You can request a call back, email us at email@example.com or fill in our online contact form.