Don’t Overlook The Benefits Of Business Leasing
Business leasing (otherwise known as Business Contract Hire) can offer more benefits to a business than personal leasing and can help your organisation run an even more efficient business. For a VAT-registered SME this can make a considerable difference.
means that the vehicle is not a depreciating asset on a company’s accounts, so this frees the business from declaring it as an asset or a liability, it is simply an expense. Vehicle leasing for a business also means you have to monitor fuel efficiency more carefully, and this usually leads to adopting telematics. This is a software system which allows you to monitor and improve driver behaviour, which can lead to making efficiency changes that streamline the business, cut out wasted journeys and introduce better route planning. But fundamentally, a business lease deal will be much cheaper than a personal lease deal, and here’s why:
How business leasing and personal leasing compare
There are many similarities between business leasing and personal leasing:
- You lease the car for a set period (months or years) with fixed monthly payments
- You pay a deposit
- The lease period can be between one year and five years, typically
- You agree an annual mileage limit
- The vehicle is assigned to an individual and is used for personal and business needs
- The vehicle is owned by the leasing company and is returned to them at the end of the lease
Annual mileage is quite often higher for a business lease, because this typically involves more motorway mileage, or if it is a van, it is used for deliveries or for jobs all around the country. Any excess mileage over the agreed limit is chargeable to the business, but some organisations subsequently pass this on to the employees responsible.
Why is business leasing cheaper than personal leasing?
Other differences refer to the fact that the monthly cost of a business lease is cheaper than that for a personal lease. This is because businesses can claim back 50% VAT on their monthly payments, and all of the VAT on maintenance agreements, but this only applies if the business is VAT-registered. A business can claim 100% VAT back if the vehicle is used only for business and is kept on company premises overnight, such as what is known as a ‘pool car’, so business leasing is always cheaper than personal leasing, where VAT is always included.
A business can also offset this cost of VAT against its end of year corporation tax. And furthermore, personal mileage incurred on a business lease deal is deducted from the total mileage, because personal mileage is subject to VAT. If you have a personal lease deal and use it for occasional business needs, you can only claim back some of the fuel, depreciation and other costs, so it is not as cost-effective as doing it the other way around.
Other benefits of business leasing
A business leasing package at many vehicle leasing companies could also include:
- A better choice of new and used vehicles due to the industry experience and contacts of the leasing company
- Flexible leasing from three months up to seven years
- Assistance in driver compliance for fleet vehicles
- Nationwide coverage
- Flexible maintenance packages tailored to your fleet’s needs
- Preferential rates from partner organisations, such as rental vehicles, accident management and tyre repairs
- Easier disposal of vehicles at the end of a lease
- 24/7 support
- Competitive funding packages to suit your organisation’s financial models
Take a look at the business leasing benefits from Pink Car Leasing.
Business car leasing can make a considerable difference to the cost base and the operating efficiencies of your organisation, as well as providing cost savings and environmental benefits. Call our team at Pink Car Leasing to discuss the range of vehicles available on a business lease basis, and we can help to make your business run more efficiently.