Benefits of business car leasing
Whether you need a fleet of company cars as a core part of your business, or you want to provide vehicles to your most valuable employees as a benefit, business car leasing is the way to get everything you need without concerns about maintenance and depreciation.
Business car leasing has many benefits, both in terms of the financial impact of running a company car fleet and the administrative burden of maintaining and updating the vehicles over time.
Here are some of the top benefits of business car leasing, whether you need just one or two luxury cars for senior managers, or a fleet for your entire workforce.
1. Spread The Cost
Running a healthy business is all about cash flow, but buying multiple luxury cars outright can leave a substantial dent in your bottom line. Company car finance deals might not be a good idea either, as they add to the amount of debt your organisation owes.
Business car leasing contracts spread the expenditure like a hire purchase agreement, but the money you pay is a rent rather than a debt. That makes leasing a win-win for your cash flow position.
2. Avoid Depreciation
The minute a new car rolls off the forecourt, it starts to lose value — typically 40% in its first year and up to 60% by the end of the third year. Buy a fleet of company cars upfront, and that’s a lot of depreciation to put in your company accounts.
Leasing arrangements protect you against this depreciation. You get a fixed monthly lease payment agreed upfront, and at the end of the lease, you can hand back the car and upgrade to the latest model on the market, without having to cover the depreciation cost.
3. Lower Running Costs
Newer cars are likely to offer better fuel efficiency (especially in the case of the latest electric car models on the market) and better reliability, so they cost less in day-to-day expenditure.
At the same time, you get more for your money, including the latest developments in comfortable, quiet cabins equipped with in-car entertainment and, crucially, all the safety features you need to protect your workforce.
4. Fuel And Environment
This is two benefits in one, as the better fuel economy of newer cars equates to lower costs and also lower emissions. This is particularly true of electric cars, which can be powered by mains electricity charging posts installed on your premises, as well as an ever-growing network of public charging stations.
EVs do not produce harmful emissions when out on the roads. While there’s still a carbon footprint associated with charging the battery, you get the peace of mind that your fleet is not contributing to poor air quality in your local area, and again this will continue to improve in the future as you renew your leases and upgrade to the newest, most efficient model.
5. Tax Benefits
The specific tax benefits of business car leasing can depend on the size and structure of your company, so always check that you understand what you are entitled to claim, and what you are required to pay.
Some examples of how business car leasing can be better in tax terms include:
- Ability to claim back the VAT on your use of the vehicle for business purposes
- Option to claim a pro-rata amount of VAT if you also use the car on personal time
- Offset certain other leasing costs against your corporation tax
If you leave the vehicle on company premises overnight and do not use it for personal purposes at all, you should be eligible to claim back 100% of the VAT you pay on your lease.
Meanwhile, if you pay corporation tax, you should be able to offset certain other costs, including the cost of a business car maintenance lease (which covers repairs) and any excess mileage charge you owe to your business car leasing provider.
The amount you can claim may depend on your vehicle’s carbon emissions, so again, it is often better to lease zero-carbon electric cars as they tend to qualify for the maximum rates of any benefits, along with exemptions from low-emission zones and congestion charges.
Final Thoughts
The benefits of business car leasing listed above are just a snapshot of some of the biggest financial and admin advantages of leasing, rather than buying your fleet outright. You may even find you attract a higher calibre of candidate when recruiting, as a brand-new company car can be a persuasive perk for ambitious applicants.
