A Simple Guide to Business Leasing
The common denominator for most businesses, regardless of industry sector, is to control the bottom line. In the current economic climate that means managing costs very closely, finding new ways to operate efficiently and ensuring compliance to avoid incurring unnecessary costs. In a fast-moving business with a thriving fleet management department this means business car leasing is essential, because it is the best way to control fleet management costs.
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What is business car leasing?
Business car leasing is sometimes known as business contract hire or BCH. It is similar to personal car leasing in that a motorist receives exclusive use of a new motor vehicle for an agreed lease period in return for a fixed monthly payment. This payment is paid and managed by the business rather than the individual and the same annual mileage restrictions and service & maintenance options also apply.
The main difference between business car leasing and personal car leasing is that a business lease is more tax efficient and is therefore much cheaper than personal leasing. A company car is classed as an asset to the employee and it is therefore taxed along with their normal income, as a Benefit-In-Kind. The amount an employee is taxed depends on the list price of the vehicle, the CO2 emissions and the type of fuel used. For 2022/23, electric vehicles (EVs) pay only 2% BIK tax, and hence they are becoming increasingly popular as fleet vehicles run by a business.
Also, a business can claim 50% of its VAT payment back on a business lease vehicle, and 100% of its VAT payment back if the vehicle is exclusively used for business purposes only. The business can also claim all of its VAT payments back on service and maintenance packages.
What are the benefits of business car leasing?
A business can expect to find several benefits in business car leasing:
Asset management: the business does not own the vehicle and hence does not have a depreciating asset on its books
Competitive pricing: the business can shop around to find the best possible car leasing deals in the industry
Flexible lease terms: fleet managers can choose different lease terms for different vehicles and drivers according to circumstances and practicality
New and suitable vehicles: employees are always driving new vehicles with the best fuel and CO2 efficiency, the best reliability and in-car tech, and these are vehicles hand-picked to suit a driver’s practical needs in terms of their day-to-day job and their driver behaviour
Guidance on laws and legislation: the vehicle leasing company will be able to offer guidance on compliance with licensing, tax, maintenance and accident management
Used vehicle option: the business has the option to lease used vehicles with good service & maintenance history, to control costs better where applicable
No disposal issues: the business does not have to worry about disposal of the vehicle at the end of the lease term, it is simply handed back to the leasing company
Fixed monthly payment: fleet management is easy to budget for with a fixed monthly payment to cover all motoring costs other than fuel
Mileage restrictions: this helps a business reduce costs and in monitoring mileage gives the business better visibility on inefficiencies and driver behaviour
Carbon footprint: Zero company car tax when leasing an EV helps a business promote best practice in terms of tackling climate change.
Speak to the experts on business car leasing
You can find expert advice on business car leasing and other benefits relating to it, such as salary sacrifice car schemes, by speaking to Pink Car Leasing today.