The Pros and Cons of Business Car Leasing
Updated 17 October 2023, originally published 14 October 2016
This article will help you weigh the pros and cons of business car leasing, so you can decide if it’s right for you.
When it comes to business, there are many reasons why a vehicle is required.
- Staff may need them to move between sites or offices.
- A pool of cars may be useful for driving to meet customers.
- Customer deliveries may require a fleet of vans.
Pros of Business Car Leasing (BCH)
More For Your Money
The biggest benefit of leasing a brand-new vehicle is that you usually get far more for your money – you don’t purchase the whole vehicle, you only pay for the depreciation.
At the end of the contract term, you hand the vehicle back to the finance company – having spent a fraction of the amount of money an outright purchase would have cost you – and choose your next brand-new vehicle to lease.
If you are VAT registered you can take advantage of tax breaks.
You can claim back at least 50% of your initial and monthly costs. Vans are allowed a full 100%.
This concession is based on the assumption the car will be driven equally for personal and business use.
100% can be claimed back if you can prove the car is used purely for the business and left on the company premises overnight and at weekends.
When it comes to business leasing, due to the lower costs you are more likely to be able to afford a better car with the latest fuel economy that will make life much better for drivers.
With the current cost of fuel in the UK, an energy efficient or eco-friendly vehicle should save a substantial amount of money for the business in comparison to an old used car. Not only that, but an economical car might have lower CO2 commissions, which could provide the business with further tax advantages.
Free Up Capital
Leasing vehicles is referred to as “off balance sheet financing”- this means the vehicles are not shown on a company’s balance sheet as either an asset or liability as they would be if purchased with a loan.
By keeping vehicles and other equipment off the balance sheet it reduces the debt burden of that company. Businesses only have a certain amount of credit available to them. If they use up their available credit with vehicles, machinery and other equipment that can be leased, they are more of a financial liability and able to borrow less for future plans and growth.
Advice and Support
CVS provide help and support throughout the lease, so if any issues or questions do arise, you can be assured of getting them addressed quickly and easily.
New vehicles offer increased reliability over older vehicles. Having your vehicles on the road is essential to keep your business operating.
CVS Ltd allows business customers to brand our lease vehicles, helping you to get your business noticed.
No Depreciation Worries
As you will never own the vehicle you do not have to worry about the depreciation of the vehicle.
A new vehicle is an asset that depreciates in value almost as soon as you drive it for the first time. By the end of the first year of ownership depreciation could be as much as 40% of the purchase value..
With leasing, rather than having a depreciating asset, you lease for affordable monthly payments and keep capital in your business.
Improved Fuel Economy
New vehicles offer better fuel economy, and will help ensure that you keep business costs down.
Road Tax and Manufacturer’s Guarantee Included
The Vehicle Excise duty is included in the lease for the entire length of the contract, reducing business costs.
As the finance and leasing company we deal with all the administration of buying the vehicle, taxing it and selling it. Freeing up your time to run your business.
We are able to create a business vehicle lease that works with your business budget. Choose a leasing period that works for your business from 24 to 60 months
High Annual Mileage
We offer a high mileage as standard, but we can tailor it to suit your business.
Improved Technology and Safety Features
The newer the business vehicle the better the technology, such as safety features,and bluetooth for hands free calls. Many vans even come with a place to use your laptops easily, as more vans are doubling up as mobile offices.
Get a new vehicle every few years
At the end of the agreement you can hand the lease vehicle back and upgrade to a new one.
Cons of Business Car Leasing
Early Termination Fees
Unforeseen circumstances can arise which could mean you need to end the contract early. This will incur additional fees
Excess Mileage Fees
If you return the vehicle with more miles on the clock than agreed in your contract, you will be liable to an excess mileage charge for every additional mile.
The contract will come with a Fair Wear and Tear Guide and so you will be expected to ensure that the vehicle is returned in good condition. Failing to do so will result in a charge.
The vehicle will never be yours
There is no option to purchase the vehicle at the end of the lease, and you must return it.
The Advantages of Business Car Leasing Outweigh the Disadvantages
Business car leasing is convenient and simple while ensuring that business owners can stay on budget.
They provide a level of protection when it comes to reliability and because the agreement is fixed for an agreed period they know exactly when they will have to consider looking to extend their agreement.
Who can get a business car lease?
You qualify to get a business car lease if you:
- have a limited company
- are a sole trader
- are in a partnership with less than 4 partners
At CVS we specialise in credit for those who have bad credit or no credit. For new companies with no trading history or for those who have had credit problems in the past we could be the answer to your problems.
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