01/06/2021
If you are thinking about leasing a vehicle for your business, then this guide to business car leasing will help answer questions.
Car leasing is growing quickly in popularity in the UK and for many people, including businesses, it's an effective way to get behind the wheel of a brand-new car.
Indeed, the British Vehicle Renting and Leasing Association (BVRLA) estimate that the business car leasing market in the UK is growing every year by around 7.6%.
However, you will not own the car, and when the leasing agreement ends, you will not be allowed to buy it.
Business car leasing is also known as business contract hire, or BCH, and this guide explains more.
The first thing to consider is what business car leasing is.
It runs along similar lines to personal car leasing, or personal contract hire (PCH).
The big difference is that rather than leasing a new vehicle for your personal use, you are leasing a vehicle with a business lease on behalf of your business.
And while a business will have sole use of the leased car for the duration of their agreement, they will never own it. It will not become the property of the business or an asset.
It will always be the property of the business car leasing company.
So, why consider business car leasing?
The simple answer is that business contract hire deals give firms the chance to reduce the financial risks that may come when owning a car.
Leasing also gives businesses access to the newest, high specification models - there's no need to deal with battered, second-hand cars.
And since cars lose a huge amount in depreciation, in some cases by to 40% over three years, means this depreciation can be an expense a business doesn't need.
Essentially, a business lease will remove the risk of how much the vehicle will lose in value, which is a positive for anybody who's wondering whether they should buy or lease a business car.
There are limits to the firms who can take out a business car leasing deal, or a business contract hire agreement, and you'll need to meet some criteria. These will include:
Business car leasing is a straightforward process. You will need to:
With Tilsun Leasing, the initial rental amount is either one month, three, six or nine months.
This initial rental will be whatever the car’s leasing monthly payment deal is, because the more you pay as an initial payment, the lower your monthly payments will be subsequently.
The leasing term for a business car is either two, three or four years.
The mileage limits start at 5,000 miles with Tilsun Leasing and rise to 30,000 miles.
While running a business car lease, the driver will need to stay underneath the mileage agreement or risk paying excess mileage charges.
And any serious damage will need to be paid for - the leasing company appreciates that cars will have fair wear and tear.
One of the big attractions for a business to undertake a contract hire agreement is that they can reclaim some of the tax.
The monthly instalments can be claimed as a business expense, along with fuel and road tax.
If the car is used solely for business purposes, then the firm can reclaim 100% of the VAT.
However, if the business car is being used in a personal capacity, even if it's just a few miles every year, the firm can reclaim 50% of the VAT.
Should the business sign up for a maintenance package - this will see the routine services being paid for, along with tyres, batteries, then 100% of the VAT can be claimed.
The rules mean you cannot claim the company car tax but the tax on electric company cars is very low.
There are many benefits to leasing a business car, and here we offer a roundup.
Having explained the positives, there are some drawbacks when leasing a car for business. They include:
There's a friendly team of experts at Tilsun Leasing who can explain the pros and cons of business car leasing deals. You can contact them today on 03330 040 888.
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