Having reliable transportation is essential to the success and growth of any business. Whether you are a small business or a larger courier business needing a fleet, Smart and Cost-Effective Car leasing benefits and convenient way of providing reliable transportation and meeting your business needs.
A Business Contract Hire (BCH) is very similar to Personal Contract Hire (PCH); however, there are key differences. With a BCH, you lease the car on behalf of your company for employees or yourself to use for business purposes. Car leases are not available to everyone, though.
This article explores who qualifies, the tax implications, and the advantages and disadvantages of Leasing a Car Business;
1. Which Business Entity Qualifies For Leasing a Car Business?
Whether you are looking for a reliable car for your sales rep or considering expanding your existing fleet, a few business types qualify for a business vehicle lease. Business car finance is aimed at the following entities:
- Sole traders
- Private Limited Companies
- Limited Liability Partnerships
- VAT Registered companies
- A Partnership
- Limited Companies
2. How Sole Traders’ Requirements Differ?
If you are self-employed and registered with the HMRC, you are eligible for a business car lease as a sole trader. For example, to find out if you qualify for the latest audi leasing deals, you would have to undergo the same process as an individual applying for a PCH. The following legal documents may be required to check your eligibility:
- An updated list of trading accounts.
- Three months’ worth of bank statements.
- Identification and address proof.
3. How Does Business Car Leasing Work?
Business car leasing is far more cost-effective than buying a brand-new vehicle outright because they offer a fixed monthly payment for one to five years. Since you are not covering the entire cost of the car, you are only responsible for depreciation. This is split between an initial down payment and the monthly payment.
The depreciation value is determined according to your contract length, the car model you choose, and the mileage limit you agree to. Maintenance packages for lease cars and insurance are not included, but road tax is.
After your lease contract expires, the car will be returned to the leasing company. As well as checking the mileage, checks for any damages will be performed. You will pay an excess mileage fee if you exceed the mileage limit. After that, you can lease another brand-new vehicle with the latest tech and safety features.
4. Is Leasing a Business Car Tax Deductible?
The Smart and Cost-Effective Car leasing benefits include huge VAT savings on your monthly payments and additional tax advantages.
Tax benefits of Smart and Cost-Effective Car leasing benefits are as follows:
- Your balance sheet is freed from vehicle costs, allowing you to use that credit elsewhere.
- Vehicles used solely for business can be claimed for 100% of VAT; vehicles used for personal purposes can be claimed for 50%
- Depending on the vehicle’s emissions, you can deduct up to 100% of the cost; for vans, this is 100% regardless of emissions.
- You can deduct all expenses related to excess mileage and maintenance against your tax bill and claim 100% of the VAT.
Taking out a business car lease involves the following considerations:
- National insurance rates will be higher if you offer company cars to employees
- Company cars add value to your employee’s salary, so they will be subject to Benefit in Kind tax (BiK)
It is not just the tax advantages your business can benefit .
Let’s examine the Smart and Cost-Effective Car leasing benefits and disadvantages of leasing a car for your business.
Pros of Leasing a Car Business
- Based on current rates, the monthly rental will include road tax costs.
- Enjoy brand-new cars with the latest safety features and technology every 2 to 5 years.
- Expenses and problems associated with older cars can be avoided.
- Set your budget based on your needs.
- An asset that does not depreciate
- You won’twon’t have to worry about selling at the end of the leasing term.
- You don’t have to worry about car repair costs as your car ages.
Cons of Leasing a Car Business
- The vehicle won’t belong to the business at the end of the lease term.
- You are responsible for fair wear and tear.
- There will be an excess mileage charge if you exceed your contracted mileage.
- Poor credit may prevent you from passing the credit check.
- Early termination of your contract will result in a termination fee.
Leasing can be an attractive option when it comes to maintaining a reliable and efficient transportation fleet. Whether your business needs a long-term lease or a shorter contract hire arrangement, you can choose an option of Smart and Cost-Effective Car leasing benefits that suits your specific needs and budget perfectly.