Every business owner and entrepreneur knows that transport is a necessity to run a successful company. As your business grows, it will be likely that you will either have to get more vehicles or, if really required, invest in a fleet to help with your staff and logistics.
However, what would be the advantages of leasing a car for your business on business contract hire?
As leasing continues to become more popular, it seems smart to rather lease vehicles for shorter periods of time than invest all that valuable capital into a vehicle that will depreciate over time. Especially if you have a small business that is still considering its options, before making any decision, you need to consider different aspects, including the car model. Some brands might be more aligned with commercial use than others.
With that in mind, let’s explore some of the top reasons why you would take out a business lease.
Fixed motoring and transportation costs with no depreciation
When you lease a car for your business, you’ll be paying a set monthly rate for the vehicle for the length of your contract. This means that you know your transport needs are sorted just by paying a set fee every month.
When the lease is done, you simply hand back the keys and get a new car – or not at all.
While the car technically still depreciates, you won’t feel the effects of this as much because you won’t pay an upfront fee for the vehicle. You also won’t have to worry about selling it at the end of your contract.
This way, depreciation falls more on the shoulders of the leasing company rather than on the drivers of the vehicle or the person that has taken out the lease.
Structured and convenient cash flow
Whether you’re just starting out or in the throes of your business operations, you’ll know that it’s always handy to have a good idea of cash flow in your operation.
Leasing helps free up cash because rather than investing in a lump sum upfront in a vehicle – or two – you can enjoy the benefits of paying a set fee every month, consistently.
Therefore, if you have set aside capital to start your business, have an investment or are budgeting, you can have the peace of mind that your lease is being paid for in alignment with monthly profits and overheads.
This alleviates the pressure of having to buy a car upfront and hopes that it will be of use as your business continues to run or grow.
Access to the newest cars with better economy and safety
It’s no secret that newer cars have a range of benefits over older ones, especially as technology continues to develop so swiftly.
Newer cars like this model from the Car Expert are safer, more economical, and better suited to life on the road than older ones – plain and simple. While it’s not always tangible to measure, this means that it can greatly help your business in its daily operations, profitability, and long-term growth.
Think of it like this: if your car didn’t have an integrated Sat Nav system that connected easily to an employee’s phone, how many work hours would be lost every month due to getting lost or pulling over to the side of the road to check one’s phone?
Or, let’s say you had a car with a brand-new engine over one that was older and gave trouble. What would be the effects of often breaking down and not being able to fulfill orders or meet clients?
Or, what if you or a salesman were unable to make a meeting and lost an important contract?
One complication with PCP is that if any modifications are required such as armouring/installation of radios (particularly for companies who provide security, chauffeuring, and close protection services), this can mean that the vehicle needs to change back to its original state or costs for damage of installation being incurred upon return, as the hirer does not own the vehicle.
The greatest benefits of leasing a car for your business are clearly measurable ones like tax benefits.
Because business car leasing is used for your business, you will be able to claim back at least 50% of the VAT on your lease. If you take out a maintenance plan with your vehicle, around 100% of this maintenance plan is taxable too – giving you an even greater gain.
Therefore, at the end of the business year, you know that there will always be a bit of money coming back in that you could then reinvest into your transport needs.
You might be able to claim back 100% of your VAT if the car is used only for business, often referred to as a ‘pool car’. This means that the vehicle will often reside on a business property and only be used for business purposes, by more than one employee.
When taking out your lease and applying to claim your tax back, you can specify whether it’s a ‘pool car’ or not for tax purposes.
Corporate tax benefits for low emission cars
When choosing a car to lease for your business, you will have the option of a range of cars to choose from. If you aim to go for a more economical car, there are obvious tax benefits not only for you but also for your employees.
The most obvious of these benefits is that cars emitting CO2 emissions up to 130g/km will be able to deduct the full cost of the lease against taxable corporate profits.
The result? If you aim for a fleet of vehicles that produce under 130g/km, not only will you pay less like a company, the employees that drive these vehicles will pay a reduced BIK and fuel benefit tax overall.
This has the dual advantage of helping you, your company, and employees save money, while also positioning you as a sustainable and environmentally-conscious business.
Closing thoughts on getting a lease for your business
Many business owners don’t often weigh up the effects of getting a business lease, even though there are many practical advantages to doing so.
As a business owner, it’s important to think outside the box and leverage convenient arrangements that not only help you run your business better but also help you manage your cash flow.
Why not consider leasing a car for your business and see how it helps you?
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