5 Benefits of Having a Business Car Lease
Every respectable business must have a business car to go along with it, a vehicle leased for the company and used specifically for business purposes only. From a marketing perspective, having a business car lease is an excellent way to promote your company wherever you go. From a practical perspective, it is helpful for employees to get to places during the working day for meetings, without insuring their car. In 2020 alone, over 57% of cars registered first-time were of company origin, demonstrating how widespread this is beginning to get.
Getting a business car lease is a legal process with many formalities; It can appear daunting to begin the process.
Firstly, you must choose a business car. Factors to consider are the size, manufacturer, model and price. By filtering through the cars, you can eliminate the ones outside of the price range and the vehicles unsuitable for your company and then choose the optimal fit for your business.
After choosing the car(s), the process includes many checks so that the car companies can be assured that the car will be used for its intended purposes and the business can afford to lease it. The business’s bank statements are part of the necessary information that a car leasing company requires for credit checks. This includes the bank, account number, sort code and rarely a history of the last 3 months of revenue and expenses.
In addition to this, the business’s information like name, address, and registration number will be mandatory in addition to three. Proof of identification is necessary only for the director of the company. However, it should be noted that for limited companies, the director must state that they will pay the leasing whenever the business, for whatever reason, cannot afford it. Subsequently, a contract must be chosen from the ones you give based on your budget (further explained below). Note that is it important to check whether the company you are leasing from offer a contract with insurance. Otherwise, this will need to be paid for supplementarily.
The last step is to arrange the delivery of the car and begin driving!
Is Your Company Eligible?
Business car leasing is aimed at many different types of businesses. These include PLCs (private limited companies), LTD (limited companies), limited liability partnerships, VAT-registered companies and sole traders.
Leases can be subcategorised into open-end and closed-end. Open-end leases have more flexible conditions for the lessee; however, you must pay the additional depreciation below the residual value at the end of the contract. In contrast, the car leasing company will pay this in closed-end leases, but the terms are more rigid. It is beneficial to decide which type of lease is more suitable for you before choosing a contract.
Contract types include:
Business contract hires: leasing for a set period without depreciation costs and returning the car.
Business contract purchase: choice between returning the car or keeping it and paying the depreciation costs.
Lease purchase: keeping the car and paying the depreciation costs.
Hire purchase: paying in instalments over a set period.
Leasing a car can have many benefits, both financial and for business growth.
VAT claim backs: leases paid monthly include VAT which can be reclaimed. 50% of VAT can be claimed back on monthly payments if car trips include both business and personal usage, whilst 100% of VAT can be claimed back on maintenance package payments that are only business usage.
Benefit-in-kind (BIK) rates: this is a perk provided to your employees as a director. This means that employees do not have to use their car to commute or travel and will pay less money for this. Additionally, car models that emit less carbon dioxide are put in lower BIK bands in the government’s hope to encourage greener car usage, hence why the tax is cheaper.
Off-balance sheet: monthly car lease payments do not show up on the balance sheet, therefore making it easier when applying for a loan. This is because the rental expense is eventually paid out, so the liability-to-asset ratio is not affected.
Upgrades: There are usually options to trade your car for a different one once the contract ends; this allows for the development and improvement of the company vehicles as the business grows.
Advertising: company cars can include extra features so that they are recognisable to the public when seen. Optional extras include decorations, personalised registration plates and creative automotive painting, essentially a passive way to promote your business to the public.
In summary, business car leasing is done through a relatively straightforward process once the steps and requirements are understood. There are numerous benefits, the most prominent being the assistance it is to employees.
You can compare options for business car leasing here.
Other useful links from our knowledge centre:
Starting a Window Cleaning Business
What Does Turnover Mean?
Can You Use A Personal Account For Business?
Remember to Compare Your Business Costs is here to help your business every step of the way from business advice, or saving you time and money on your business purchases such as: